Download the correspondence between TPR and the Work and Pensions Committee and you find yourself with something called .
It’s a spelling which suggests something a little irregular , a suggestion confirmed by the contents of the file
The “dispute” is caused by the disparity between the Office of National Statistics and the Pension Regulator/PPF’s analysis of the current state of DB finances. This matter is getting very little coverage , other than from the FT, but it is of more than technical significance.
Link to a very technical letter where the Pensions Regulator attempts to explain to MPs how it calculated estimated pension liabilties fell by 50% (£369bn) between 2021-23.
Recommend reading with a coffee/teahttps://t.co/vi1vc93u5x
— Josephine Cumbo (@JosephineCumbo) March 14, 2024
To put it in a nutshell, TPR has 80% of schemes in TP surplus at March 2023 – the ONS data would put that at 52%. The difference at that date is £171 billion. There are similar differences for buy-out and low-dependency.
The matter is of sufficient concern for Sir Stephen Timms, Chair of the Parliamentary Work and Pensions Committee to persist.
His question is whether TPR’s figures are fit for purpose. As they are behind the new DWP Funding Regulations Impact Assessment and the new DB options consultation, Parliament is concerned that policy is being created using irregular data.
Later in the week, the ONS are due to publish their latest research, which will cover June and September 2023 – the latter is the date at which most of TPR’s analysis was done.
This blog will be keeping you posted.
“Desputed” – disputed
The file can be downloaded from WPC’s website using this link.
It’s a warning to us all – filing matters too!
This blog is not holding itself out to be “typo-free” , nor pointing a finger to any finger.
Without spell-check, Twitter has ongoing “liabilties”!
As in all things – a sense of proportion and humour is required! My thanks to the tolerance of those who read this blog for my many errors!
This is not an arcane subject of interest only to a minority. TPR’s figures have supported the Impact Assessment of the new Funding Regulations and the current consultation on DB scheme options. If we take the ONS figures, they appear to have understated the costs of these measures materially, by tens, possibly hundreds, of billions of pounds.
The ONS is scheduled to release its data for June and September on Thursday 21st, which will enable a full comparison. Iain Clacher and I have a blog in preparation for that.
Desputed?
I doubt many at TPR are aware, but its creation was of political necessity to protect the reputation of a particular CoExq, not to improve or protect worker’ pensions. As such its powers were excessive and misguided, and its culture its political rather than founded by any basis of fact or right. I’ve no doubt that culture pervades all and everything it says has gone through a wall of lawyers and PR spin and degrees of sophistry. Timms is right to challenge, but does anyone expects any illumination to follow from an organisation intent in protecting itself and burgeoning headcount.
Unfortunately I’ve come to expect more admission of culpability from the Russian electoral commission, than TPR.
For how long has this DB structure been available?
After all this time it seems the blind are still leading the blind or are they being guided by the partially sighted?
Unfunded tax payer underwritten schemes benefit the rule makers, does that conflict of interest bother anyone?
DC at least tells an honest story to the beneficiary.
If only the beneficiary could understand the consequences of procrastination
early in the game but then again “advice” is being killed off along with innovation
The First named objective for the Pensions Regulator set by the Pensions Act 2004 reads:
“5 Regulator’s objectives
(1)The main objectives of the Regulator in exercising its functions are—
(a)to protect the benefits under occupational pension schemes of, or in respect of, members of such schemes,
Is seeking to protect the benefits through a higher cost insurance company buy-out protecting the benefits under an occupational pension scheme?
Ideally, the policy considerations should not be for Trustees to worry about.
But, the (expected) scale of the transfers to Insurers is so enormous, do they (or the actuarial advisers under new TAS300) need to start considering the whole system impact and risk.
And are Trustee immune from challenge if they assign away expected surpluses to the benefit of third parties (ie Insurers)?
My understanding is that the PRA regime requires prudent person investment and in embedded day-1 surplus. So Trustee must now know that they are giving away a clear expected surplus, never to be accessed by any of the intended scheme beneficiaries, never to access that surplus to fund expected (albeit) discretionary increases to protect against high cost of living increases.
Pilate like, Trustees will look to wash their hands of this, but political will and retribution has a long memory and I doubt the political landscape will always be so protective of Trustees who are gleefully handing over tens, nae hundreds £billion of scheme assets and gains to the City, when others are more deserving?
Yes, we should celebrate the ability of the City to supply capital and create wealth, but this current exercise feels like the largest regressive wealth transfer in history, taking money out of the pockets of workers’ and pensioners, funnelled in an orderly fashion to the City and beyond….
We have a Pension PlayPen coffee morning tomorrow on “risk transfer” – aka buy-out ; I expect these points to be made there. Thanks Jnamdoc , Con and John.
A truly basic problem with assessing the financial health of any long-term financial arrangement (including DB funded pension schemes) is the concept that a uniquely accurate pair of single numbers exist, one for “liabilities” and the other for “assets”, the comparison between which is “correct”. Ignoring the mark-to-market aspect, even though it has been seriously negatively influential, the real elephant in the room is using a discount rate process at all. This rant is continued on http://www.discrate.com, happy to chat.
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I’ve seen it argued that the aggregate value of employers sponsoring DB is an order of magnitude higher than the aggregate value of insurers taking on DB liabilities. So while one scheme transferring to an insurer might be “de-risking”, most of the private sector DB industry transferring to insurers might cause a systemic risk.
I spent some time yesterday looking at TPR’s prescription for Funding and Investment strategy statements. These focus on managing the assets to match the actuarial model, and not at all on managing the assets to provide for benefit payments. DWP and TPR between them do not appear to be in the least bit interested in providing pension schemes (as opposed to pots) for the common good.
I had hoped that I would be able to manage pension schemes and their application of the long term funding target in a sensible way. But that hope is in sharp decline.
Agreed, Derek, and that is the fundamental fault line in our pension and economic system.
It was explained to me at the time by some of those charged with drafting the Regs, that TPR was created to prevent a corporate failure (which by the way is a fundamental necessity of a functioning market economy) from causing a pension embarrassment to Gordon Brwn. And not in any way to promote or fund pensions.
The scale of pensions now is so enormous (naturally) that a fiscal drag policy (TPR’s beloved ‘de-disking’) has, as we are witnessing, the effect of derailing the whole economy – wasting £60bn on HS2 is chicken feed when set against the fiscal drag of £1.5trn of dis-invested pension funds.
The ONLY answer, of course, to the increased income needs of an aged population is to invest and grow. Not, for the DB baby-boomers to hide the money under the de-risking mattress, hoping that the under invested, under trained, with an increasing migrant constituent (an economic rather than political matter) and hugely indebted youth ( ie our future tax payers) don’t figure out it out and rip up the rule book to better suit them.
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