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.