UK pension rules risk ‘finishing off’ remaining defined-benefit plans, MPs warn https://t.co/9M2lz6c2Ky via @ft
— Josephine Cumbo (@JosephineCumbo) March 26, 2024
Early birds can catch the free link to Jo’s story here . If the link’s expired, mail henry@agewage.com – I’ve more in the cupboard.
The key statement in the Work and Pension’s report on the funding of UK Corporate DB schemes is as follows
TPR’s approach to regulating scheme funding has been driven by its objective to protect the Pension Protection Fund (PPF). It has prioritised protecting benefits that have been built up, encouraging a de-risking approach which has increased the cost of DB schemes for employers. Given the improved funding position of schemes, and the fact that the PPF now has £12 billion in reserves, this objective is no longer needed. Open
and continuing schemes now need confidence that the additional flexibilities that have been promised will be reflected in the actual approach regulators take in future. To signal the change in approach needed for this, TPR’s objective to protect the PPF should be replaced with a new objective to protect future, as well as past, service benefits.
The “new approach” called for, is mirrored in the language of the Pensions Regulator with CEO Nausicaa Delfas calling for a “new mindset”. But so far, there has been precious little evidence of change , change badly needed if our £1.5trillion DB asset pool is not to further diminish, eroded by an over-conservative approach to investment and by the attrition of buy-out and buy-in by insurance companies.
You can read the Work and Pension’s report here. It’s published today.
The language of the report is unambiguous, the criticism direct
“Two decades of regulatory policy caution have almost entirely destroyed the UK’s DB system.”
https://www.ft.com/content/a0d5a69e-8b56-44ea-9ba8-0bcc71122113
“We continued to hear concerns from open schemes that the new funding regime would require them to de-risk inappropriately,”
The WPC called on the government and TPR to
“act urgently to ensure they do not inadvertently finish off what few open schemes remain by further increasing the risk aversion”.
Last week this blog published evidence from Iain Clacher and Con Keating that the data that TPR is basing its decision making and soon to be published DB code on, is at odds with data from the Office of National Statistics.
Their blog concluded
it would be sound and rational risk management to defer passage of the new funding regulations until such time as the uncertainty in the aggregate funding position of defined benefit pension schemes has been resolved
It is time that the Pensions Regulator took notice of WPC and indeed the ONS data. There is something rotten in the town of Brighton, we need the negative mindset that is doing day to day damage to pensions to change and change immediately.
The Pensions Regulator