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Regulating Scheme Funding

This article discusses initial suggestions for regulating pension scheme funding, including triggers for funding, recovery periods, and other concerns raised by the ACA. It also highlights positive observations and additional concerns that need further clarification.

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Regulating Scheme Funding

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  1. Regulating Scheme Funding • Alistair Russell-Smith

  2. ACA initial suggestions √ • Funding trigger – de-link from Buy Out • Funding trigger – FRS17 or S179 • Lower trigger for non-pens than pens • Recovery period trigger – 15 years • Interim trigger - remove √ Х Х √ Did TPR listen??

  3. Other ACA initial concerns • Employer contributions • Running costs • Case studies • Death of DB

  4. Other changes vs Recovery Period • Technical Provisions • Recovery Period under 10 years • ROA trigger for Recovery Plan • TPR will assess strength of employer • Contingent assets considered when assessing TPs and RP

  5. Special circumstances • Not-for-profit & regulated companies still subject to the triggers… • …but will take account of their ‘special circumstances’ periodic price reviews voluntary income? other available funds? contingent assets? term of franchise agreements

  6. Secondary assessment would intervening achieve anything? prudent TPs? will TPR act? appropriate RP? potential impact on PPF potential impact on members’ benefits

  7. Positive observations • TPR has listened… • ‘Triggers not targets’ • Focus on strong Technical Provisions • Realistic investment returns on Recovery Plan • Contingent assets considered • No interim trigger more detail due in May

  8. Concerns • Weakening of Trustee position where there is a strong employer • How many schemes will be caught? • at trigger stage • at secondary assessment c. 70% ? How fast can I go?

  9. Some examples • What is an unreasonable investment return assumption? • What is the actual impact on not-for-profits and regulated companies? • Small schemes / basket cases to be ignored? need case studies

  10. More concerns… • Running costs • Push investment bonds • Employer contributions Death of DB??

  11. THANK YOU

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