Views of the proposed DB Funding Code from Con Keating

In their weekly Pensions Buzz survey, Professional Pensions posed the following question: “Is TPR’s approach to the new DB funding code the correct one in your view?” There were 100 respondents to the survey, of which 67 were trustees, scheme managers, administrators, or finance directors. This compares favourably with the consultation submissions where just one third were from schemes. This survey actually records the views of more schemes than the consultation submissions did. As this survey is anonymous, respondents are less influenced by the need for the formulaic and stultified language of consultation response etiquette. These responses are more likely than the consultation submissions to reflect, unbiasedly, the true feeling of those directly affected, schemes.

The responses were tabulated as:

Broad Support?

At this high level, these results provide scant support for the interim response’s description: “Overall, there was general support for the principles and regulatory approach proposed in the consultation.”

The survey also invites respondents to offer comments along with their multiple-choice response (above). There were nine comments from those responding “Yes” (29%). With the exception of one comment (“The long-term goal needs to be taken into account for all schemes.”) all of these qualified the respondent’s support for the proposed Code, such as “I agree with the principle of aiming to address longer-term funding for poorly funded and / or governed schemes, but I don’t think the current proposals allow sufficient flexibility for well-funded / governed schemes. I do not agree that schemes necessarily need to aim to reach low dependency by the time they are significantly mature.” They may have ticked “Yes” but that is very substantial objection to the proposed code.

There were just five comments (12%) from those responding “Don’t know”. The most supportive of the Regulator’s position among those were: “Too early to provide a definitive answer” and “We wait to see second consultation.”

No Support.

The 28 “No” responses drew eleven comments (39%) – All were negative.

These comments were longer on average than the comments of those responding “Yes”. They raise a wide range of objections, among which are: “Typical (and disappointing) TPR tunnel-vision, looking only at scheme funding from the point of view of the scheme. The employers have an appalling job keeping their businesses going despite Covid lockdowns and Brexit – the last thing they want is TPR putting his oar in.”,  “More money in sooner and greater adherence to loss making gilts in a fast track approach doesn’t make for intelligent flexible decision-making in the best interests of members in the cases which matter – i.e. where member outcomes are more at risk.” and “It will pressurise Trustees towards more conservative asset strategies, which increases funding costs and so decreases affordability for Sponsors.”

The results of this poll resonate more with the impression left from reading 47 submissions rather than the Regulator’s spin offered in the interim consultation response. Given these survey responses, the Regulator would be well advised to follow their stated course of action: “We will consider all comments carefully and with an open mind.” and that must include a radical revision of the proposed Funding Code.