The Pensions Regulators new statutory funding objective must be flexible and pragmatic enough to reflect the long term nature of pension scheme funding according to the National Association of Pension Funds .
In its response to the Pensions Regulators consultation on scheme funding, the NAPF says the objective will be a major factor as to whether employers will continue to support defined benefit schemes.
The Association agrees with the proposal to use triggers to identify schemes that require further scrutiny. But it questions the use of percentage of buy-out cost as a funding filter, and urges flexibility in the application of the ten year recovery period filter.
The NAPF proposes an alternative funding filter, based on the discount rate adopted for the funding plan, which it believes would approach the issue of funding strength and risk more directly.
NAPF chief executive Christine Farnish says: The Regulator has so far demonstrated its willingness to engage positively with the industry, and to take account of views and concerns of pension schemes and their sponsors. How scheme specific funding is implemented will be a crucial test of the regulators commitment to help ensure that remaining DB schemes are not further damaged by an over-zealous regulatory environment.