View more on these topics

Pensions Regulator says 130bn deficit could be paid off in 10 years

The Pensions Regulator says UK plc’s 130bn pension deficit could be paid off within 10 years with minimum disruption to the economy.

It believes that up to 80 per cent of companies could realistically close their deficits without facing more than a 25 per cent reduction in their free cashflow.

But the TPR’s reliance on FRS 17 and benefit buyout costs to gauge funding requirements has been criticised because it uses actuarial discretion to calculate deficits.

Watson Wyatt senior consultant Nigel Bodie says the buyout cost for most schemes is unknown and would be expensive to ascertain.

TPR strategic development director Charlie Massey also admits that FRS 17 is part- ially flawed because mortal- ity rates are not proscribed so can be adjusted to reduce liabilities. But a single proscribed technique would not work because of the different mortality profiles of different occupations.

These assumptions will be the basis for the TPR’s red, amber and green grading system with red-rated schemes in need of regulatory intervention to potentially set accrual and funding levels. The colour rating of comp- any schemes will not be published.

Massey says: “There are one or two weaknesses around FRS 17 because mortality is not proscribed but trustees have a fiduciary responsibility to flag any issues up to The Pensions Regulator.”

Bodie says: “Continued use of the term buyout by the The Pensions Regulator gives trustees and members an unrealistic notion of the sec- urity of pensions.”

Recommended

FPI goes for ultra flexibility

Friends Provident International has brought out Premier ultra, an offshore unit-linked bond aimed at high-net-worth investors.

Gerrard weights exposure

Gerrard Investment Management has teamed up with structured product provider Woolwich Plan Managers to offer IFAs a structured product which has weighted exposure to four stockmarket indices depending on performance.

2CG explore Euro income

2CG, a company founded in 2000 by former M&G head of continental Europe Charles Glasse and former Credit Suisse manager Christopher Garsten, has introduced the Zenith European income fund.

Rayner Spencer Mills: Why we rate the Artemis Global Growth Fund

Ken Rayner and Graham O’Neill from RSM explain why they rate the fund, its investment process and how it can be used in a portfolio. The Artemis Global Growth Fund became a RSM ‘rated’ fund earlier this year. In this video, Ken Rayner and Graham O’Neill explain the fund’s investment approach, why they rate it, […]

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

    Leave a comment