A chance to keep companies with DB pensions solvent

pension_1703183cIncome and Corporation taxes tend to dominate the mindsets of the rich, they are  meaningless to those who don’t pay them.

Unsurprisingly, it is the headline aspects of the Chancellor’s autumn statement that have captured the headlines. This small clause was initially ignored

1.137 The Government is determined to ensure that defined benefit pensions regulation does not act as a brake on investment and growth. The Department for Work and Pensions (DWP) will consult on providing the Pensions Regulator with a new statutory objective to consider the long-term affordability of deficit recovery plans to sponsoring employers. The Government also recognises that volatility in measures of pension scheme deficits can make it hard for companies to manage their investment plans and attract external funding. DWP will also consult on whether to allow companies undergoing valuation in 2013 or later to smooth asset and liability values.

The only response I’ve seen so far was an acerbic report in Professional Pensions “Treasury accused of seeking billions in revenue by smoothing discount rates


Treasury accused of seeking billions in revenues by smoothing discount rates

One impact of smoothing discount rates might be for small companies, struggling to keep their pension schemes solvent under the stringent accounting standards of FRS17, IAS19 and the like, may not pay quite as much quite as quickly under the DWP’s easement.

Small companies can and do argue that one reason companies are holding back from investment is that they are terrified of the unexpected demands of their pension scheme trustees at the behest of scheme actuaries.

Just how commentators can turn an easement that should help small businesses to plan their cash flows is beyond me.

We must be careful here. It seems that an opportunity is emerging to ensure that small DB plans remain affordable and do not impair small businesses to grow or at least sustain themsleves,

We must also be careful not to annoy not just Government but all those outside the immediate pensions loop by moaning even when help is at hand.

Tax is not everything. It is inconsequential to many. Job security and a decently funded pension plan are more important to the working person than macro-economic considerations.

I will leave it to my First Actuarial colleagues, Hilary Salt, Derek Benstead and Mark Rowlinson, to  ponder  what “a new statutory objective to consider the long-term affordability of deficit recovery plans to sponsoring employers” might be.

I sincerely hope that the possibility that schemes claim less tax relief is more than offset by the likelihood that these schemes continue to be funded by solvent employers. This is a  rather better option for the tax-payer  than being the insurer of last resort for liabilities falling into the PPF.




About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
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