Continuity option 3: closing the scheme to new contributions or members

CDC code in force: 1 August 2022

We are more likely to be satisfied where the trustees’ continuity strategy shows that they have considered each continuity option, in conjunction with the general requirement to address how members’ interests will be protected during a triggering event period.

We expect trustees to consider when it is likely that continuity option 3 will become a viable option and give an estimated timeframe for including the details in an updated strategy. However, we do not expect trustees of a new scheme to plan for continuity option 3 when it first applies for authorisation, unless this is the only continuity option open to the trustees under the scheme rules. Where continuity option 3 is not permitted under the scheme rules, we expect that to be stated in the strategy.

Continuity option 3 is for the scheme to run on as a closed arrangement.

Key issues to consider when pursuing continuity option 3

Key issues to consider when pursuing Continuity option 3 are set out in the table below. We are more likely to be satisfied that the continuity strategy is adequate if it addresses these points:

Requirement	Matters more likely to satisfy TPR
Details of scheme rules on how continuity option 3 is given effectCP1	Any provisions in the scheme rules that permit or require the scheme to operate as a closed scheme and any provisions that apply during the period of operation as a closed scheme. Any conditions or circumstances in which the trustees would operate on a closed scheme basis, as opposed to pursuing one of the other continuity options. Appreciating how the scheme’s design and method of actuarial management may have consequences for closing the scheme to new contributions or members.
Details of the strategy for operating a closed scheme and meeting costsCP2	The point in time after which the trustees consider that continuity option 3 may be a viable option, where appropriate relating this to the 3- to 5-year timeframe of the CALP. How long they would operate the scheme on a closed basis. The factors which the trustees would take into account to assess whether continuity option 3 could be sustained indefinitely. How target benefit levels could be sustained. Whether the scheme’s viability report and certificate would need to be revised, including the costs of this and how they will be met. How the costs of running the scheme would be met. How financial reserving requirements would be maintained throughout the proposed lifetime of the closed scheme. How the trustees would stop accepting new contributions (where applicable), the timescales for doing this and how they would deal with late payments. How they would stop admitting new members (where applicable) and the timescales for doing this. A plan for making decisions on the scheme’s investment strategy and dealing with investments. Whether they would divide the scheme and open a new section. A summary of the assumptions behind any estimated figuresCP3.
CommunicationsCP4	How and when they would consult with beneficiaries and employers on proposals to close the scheme. How the costs of communication would be met. How they would maintain communication with TPR.

Legal references

^CP1 Regulations 15(1)(a) and (b) of the Regulations

^CP2 Regulations 15(1)(a), (b), (l) and (n) to (t) of the Regulations

^CP3 Regulations 15(2) and 15(3)(c) of the Regulations

^CP4 Regulations 15(1)(c) and (d) and 31 of the Regulations

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