Towers Watson says that analysis published by the Department for Work and Pensions and the Pensions Regulator today shows how seriously defined benefit (DB) pension schemes should take the European Commission’s desire to overhaul pension funding rules.
The UK impact assessment, published on DWP’s website today, suggests that a “middle level” outcome would be to increase funding shortfalls by £150bn, but that this figure could be as high as £400bn depending on the details of any reforms.
Mark Dowsey, senior consultant at Towers Watson said: “The regulator’s estimates are very sensitive to highly uncertain assumptions but underlines the magnitude of the threat that could be facing employers. The real consequences depend on what employers are required to do in response to higher recorded shortfalls – something about which very little has been said.
“The UK does not have a veto over these plans so will be hoping either to build a blocking majority or that Commission personnel changes before things go too far. The impact would also be watered down if pension promises made in the past were excluded from the new regime, which the Commission has said could be an option.”
The regulator’s analysis says that ‘we would expect more schemes to close to future accrual if any proposals from the Commission result in higher recovery plan requirements [i.e. payments from employers to eliminate deficits].’
|
