Pensions - Articles - ECWG launches guidance to promote leading practice

 Since the launch of the Pensions Act in 2004, the Pensions Regulator (tPR) has consistently raised the bar on its expectations of trustees and employers with DB schemes to comply with funding requirements. Over time practitioners have developed their own methodologies when appraising the covenant of employers. With this in mind, the ECWG has been formed to address the need for greater consistency, recognised leading practice and improved standards in covenant advisory work.

  

 Chair of the ECWG, Gary Squires, who also heads AlixPartners’ Pensions Advisory team comments: “There are still 11 million people in 6,000 DB pension schemes in the UK. The 2015 Purple Book published jointly by the PPF and tPR discloses that these schemes collectively face a solvency deficit of some £800 billion at present. This funding gap ultimately needs to be filled by investment returns and employer contributions for a considerable time into the future. The Pension Protection Fund safety net covers well under half of this collective deficit and the vast majority of employers would not want their schemes and their members to have to rely upon its use.

  

 “Given the scale of the challenge it’s clear that there is a need for a consistent approach to addressing funding deficits and the members of the ECWG’s work assisting trustees, scheme sponsors and regulators in considering an employer’s ability to pay contributions into the future is vitally important to help secure the retirement of millions of people. “