It’s been a time since Con Keating and Iain Clacher have written on this blog . They have confined themselves of late to commenting on the disparity between the supposed assets in corporate DB pension schemes as estimated by TPR, PPF and ONS.
The short blog published yesterday asks a pertinent question
The most worrying aspect of the discrepancies is the Impact Assessment for the new low-dependency funding requirement was based on TPR figures. It seems that the new DB funding regime is likely to prove extremely costly to schemes, sponsors and the taxpayer. At the very least, some explanations are due.
In July, TPR published its DB funding code with Exceptions to this are where the Regulations provide that certain matters are to be specified by the draft Code, such as setting the duration in years (or other date), which defines when a scheme will reach significant maturity.that explained that the code is not written in stone but can be challenged, especially around the duration to significant maturity. (section 6.3)
Exceptions to this are where the Regulations provide that certain matters are to be specified by the draft Code, such as setting the duration in years (or other date), which defines when a scheme will reach significant maturity.
Government did not publish an impact assessment in July relying on an earlier statement which you can download here, or read for yourself
The assessment suggests that the intervention of the DB funding code will lighten the load on DB schemes by £20.6m per year (£300m over 10 years in the July explanation). Keating and Clacher’s point is that this is based on incomplete information.
Should the watchdog bite?
Another commentator on my blog points out that the DWP parliamentary watchdog has itself picked up on the discrepancy and is asking the same question
A Work and Pensions Select Committee report in March 2024 recommended that the PPF and TPR should work with the ONS to obtain more accurate results and publish these.
There seems to have been no public response to this recommendation.
TPR representatives are said to read these blogs, so why don’t they respond to Clacher and Keating? What are they trying to hide?
TPR hid behind this (to me) feeble explanation in oral evidence to the WPC in November 2023:
“First of all, they are used for different purposes. The ONS uses a sample of schemes, around 10% to 15%. It tends to focus on the larger schemes, and it will look at the funding levels and the level of assets over recent periods. It will then use that data to effectively scale for the smaller pension schemes. It does not hold the data on the smaller pension schemes. We hold the data on all the pension schemes. That is why our numbers differ.”
PPF was more open than TPR and admitted this much to the WPC in writing in December 2023:
“We are clear in our 7800 index publications that we don’t hold enough data to capture the structural changes to asset allocations, nor to capture changes to in any leveraged LDI portfolios (these factors have been particularly pronounced since March 2022) and as a result, the impact on assets will often be less accurate than the ONS survey.”
This discrepancy has been known for some time. It has a material impact on the calculations within the DB funding code and the impact assessment of the Code’s implementation. The Code came into effect today.
This is not new. There have been problems in making decisions and communicating them ever since the WPSC March Report of 2024. The last government just sat back and did nothing and then held an election. The present government, slow in response, are hardly thinking about it. On clause 161 of said report our Pensions Secretary has made a statement to the PAG/Pensionstheft Group that it needs to be considered in due time. Do we know what that means?
The new Government finally published its response over a year after the Work & Pensions Select Committee reported on 26 March 2024.
publications.parliament.uk/pa/cm5901/cmselect/cmworpen/870/report.html
Thanks Byron and Peter Beattie, this is on my “to read list” and I’ll try to comment over the weekend.
Thanks Henry I look forward to your comment asap. The government report in response to WPSC does not give those of us that are suffering degraded pensions any real confidence that our plight would be any real part of ‘change policy’ being part of their socialist attitude of if we already have it – we ‘demand more’.
Tomorrow
I hope that you now can access three blogs on the 23 recommendations Peter
Indeed, it is not new. However, the discrepancy with TPR’s figures grew by more than 100% in 2023 from £153 billion to £327 billion – that is 27.5% more than the ONS survey result. The growth is as worrisome as the emergence of a discrepancy. It is large in terms of our economy, not just our DB pensions.
It holds the prospect of stymying government’s productive investment agenda on its own. With business investment running at around £240 billion annually, its economic consequence may be judged.
We are in Post Office 2 scandal type territory, but multiplied a thousand times!
By that I mean the Institutional protection and cover up both by those who orchestrated and those who profit from this catastrophe is just bewildering and truly truly Orwellian, and includes the marginalisation of those of clear and independent minded enough to challenge this insanity.
An economy wide de-risking and abandonment of investment as a concept (and everything that entails – without commerce, innovation and industry and economic gain and surplus) will mean we simply cannot afford to provide what, will now become luxuries, of quality education and quality healthcare and other vital societal connectors (and the defence of our Nation). Sadly thus is all self imposed on the alter of an the cult of derisking.
The work on this blog and others led to the Dec-2023 Sir John Kay paper, pulls the threads of this together and which he states that “The collapse of private sector defined benefit pensions may constitute the most serious avoidable policy disaster in Britain this century. We have damaged the retirement prospects of a generation and the growth potential of the British economy. We need to start again with a different philosophical approach.”
What should have been welcomed as a seminal paper, and the October 2023 forum meeting featuring the eminent John Kay & Mervin King, was largely and conveniently marginalised by our industry as thinking of yesterday’s men.
But the truth of economic tide is stronger than the cults that paddle along the beach in sunny times, and that tide can only be held back so long.
The recent Cooper Hymans paper at least is a first coherent attempt to face and offer solutions to the pension induced mess we’re in. Key amongst the fixes is to rediscover and embrace the need to INVEST.
The new economic strategy is for all causes to turn to growth. All must align behind that. We cannot rely on the State if we cannot afford the State?