View more on these topics

Trustees urged to consider affordability of pension deficit repayments

Money-Currency-Falling-Coins-700x450.jpg

The Pensions Regulator wants trustees of defined benefit schemes to consider the impact setting high deficit repayment contributions could have on the financial strength of the sponsoring employer.

Trustees of DB schemes with a funding gap – that is where the value of a scheme’s liabilities is greater than the value of its assets – are required to set annual employer contributions designed to repair the deficit over a set period of time.

TPR has published a statement today setting out acceptable approaches to valuing and paying off pension deficits.

The regulator urges trustees to take into account what is “reasonably affordable” for the employer when setting deficit recovery plans.

It says: “In setting contribution levels trustees should take into account what is reasonably affordable for the employer. This will be an employer-specific assessment and our analysis highlights that there is a wide variety in employers’ circumstances. 

“As a starting point, trustees should consider whether the current level of contributions can be maintained. For some employers it may be reasonable to make increases, perhaps as a result of improvements in business performance, without damaging any future plans that grow the covenant to the scheme. Others may find that they are unable to do so.

“Where there are significant affordability issues trustees may need to consider whether it is appropriate to agree lower contributions and this may also include a longer recovery plan.

“Trustees should ensure that they document the reasons for any change and indicate that they have had due consideration of the risks.”

The statement follows an announcement from the Government in the March Budget that it plans to give TPR a new statutory objective to “support scheme funding arrangements that are compatible with sustainable growth for the sponsoring employer”.

The regulator says the precise wording of the new objective will not become clear until later in 2013 and is subject to parliamentary process.

National Association of Pension Funds chief executive Joanne Segars says: “Many businesses going through their valuations in 2013 are facing much tougher conditions than they did three years ago, so they will be encouraged by this sign of support. 

“However, it is one thing to talk about flexibility and another to allow it to be used. The regulator must stand by its signals.

“We are encouraged by this latest statement and the signs so far of a change in the regulator’s approach.”

Confederation of British Industry chief policy director Katja Hall says: “It is good to see that The Pensions Regulator has already started taking into account its new economic objective.

“The CBI has been clear for some time now that the best protection for member benefits in the long run is a thriving employer.”

Recommended

1

Think tank promotes ‘Tell Sid’ sale of RBS and Lloyds

A think tank will call on chancellor George Osborne to reprivatise Royal Bank of Scotland and Lloyds Banking Group through mass share sales to the general public. The Financial Times reports The Policy Exchange will deliver the recommendation that a mass share sale would be the quickest and most effective way for the state to […]

E&Y: Providers to launch long-term care annuities ‘in months’

Providers will continue to shun the pre-funded care insurance market but could launch new “immediate needs” annuity products within months after the Government confirmed it will introduce a cost cap. Earlier this year the Government set out plans to introduce a £72,000 cap on long-term care costs from 2016. The means test threshold above which […]

West Brom pledges to continue offering advice

West Bromwich Building Society has committed to continue offering its customers investment advice despite the withdrawal of its bancassurance partner Axa. Axa decided to close its bancassurance arm last month, resulting in 450 job losses. The company said at the time it would have had to charge a 6 per cent advice fee in order […]

FCA requests details of Sipp firms’ business plans

Experts warn the Financial Conduct Authority is ramping up scrutiny of Sipp providers after the regulator requested detailed information on firms’ post-RDR business plans. Last week, the FCA contacted Sipp providers asking for details of the way each firm operates. The information request includes questions about the number of scheme members, assets under administration and […]

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

    Leave a comment

    Close

    Why register with Money Marketing ?

    Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

    News & analysis delivered directly to your inbox
    Register today to receive our range of news alerts including daily and weekly briefings

    Money Marketing Events
    Be the first to hear about our industry leading conferences, awards, roundtables and more.

    Research and insight
    Take part in and see the results of Money Marketing's flagship investigations into industry trends.

    Have your say
    Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

    Register now

    Having problems?

    Contact us on +44 (0)20 7292 3712

    Lines are open Monday to Friday 9:00am -5.00pm

    Email: customerservices@moneymarketing.com