Pensions - Articles - Flexibility on funding could reduce deficits by £100bn

 Commenting on The Pensions Regulator's annual statement made today on pension scheme funding, Raj Mody, partner and head of pensions advisory at PwC, said:

 "The Pensions Regulator has announced some important points in its annual statement today that could make life easier for companies with large pension deficits.

 "Significantly, the Regulator highlights there is flexibility in the current funding framework to allow employers and trustees to agree workable plans for repairing deficits. In particular, there is flexibility in how deficits are assessed and also the balance between cash contributions to repair them versus other sources of income such as investment returns.

 "In our experience, the potential flexibility is not being used as much as it could be. For example, modernising the approach to setting assumptions for discount rates and inflation could easily help reduce overly-prudent deficit assessments by over £100bn across UK plc's defined benefit pension schemes. The cash otherwise available and not prematurely tied in up pension funds could instead be deployed by companies to strengthen their businesses and so the economy. This in turn will be good for pension sponsors, trustees and members alike.

 "The Regulator appears to be moving towards categorising schemes according to how well funded and secure they are. As long as the Regulator is transparent about how it deals with each type of category, this should support the pensions industry to focus on the right issues and risks."