CDC code in force: 1 August 2022
Trustees must satisfy us that they have access to sufficient financial resources to operate their scheme before and after a triggering eventFN1. This can be demonstrated in different ways. We will expect schemes to provide relevant evidence to support their calculations of running costs.
Our assessment of the scheme’s financial sustainability will also take account of the evidence presented in relation to systems and processes, and the continuity strategy.
The evidence required will depend on the circumstances of the scheme and will include the costs, assets and liquidity plan (CALP) and any other evidence necessary to demonstrate a scheme’s financial resources.
Where a scheme relies on employer support, the trustees and each relevant employer must demonstrate that together they can meet the financial sustainability requirementsFN2.
A scheme that cannot meet the financial sustainability requirements at any point may not satisfy us that it should remain authorised.
Matters we must take into account in assessing a scheme’s financial sustainabilityFN3
We require sight of, and will consider:
- the scheme’s CALP
- evidence of any financial reserves held for supporting the activities of the scheme
- documentary proof of any support offered by the employer(s)
- details of any joint bank account or escrow held by or on behalf of the trustees and employer
- relevant extracts of the scheme’s trust deed and rules, which govern expenses and winding-up arrangements
- details of service contracts and insurance policies held by the trustees
- any other documents that the scheme can show to be relevant – see other ways of meeting scheme costs
Running costsFN4
Running costs are the costs of setting up and running the scheme on an ongoing basis, whether in-house or outsourced.
We do not require trustees to maintain a reserve for running costs, although they may do so. We will focus on the expected and realised costs of the scheme, the ability of the scheme and employer to cover them, and the enforceability of any commitment of support.
Where costs of setting up the scheme have been incurred and fully paid at the point of application, they do not need to be included in a calculation of running costs. However, any such costs that are still outstanding, or yet to be incurred, will have to be detailed.
Legal references
FN1 Section 14(2) of the Act
FN2 Paragraphs 2(f) and 3(e) of Schedule 3 to the Regulations
FN3 Regulation 12 and Parts 2 and 3 of Schedule 3 to the Regulations
FN4 Section 14(2)(a) of the Act