Concerns remain over how a tougher approach to defined benefit scheme funding will conflict with the tPR’s supporting ‘sustainable growth’ objective. With a majority of employers reporting the funding of their DB scheme is impacting on business performance, the vast majority favour a legal change in the upcoming 2019 Pensions Bill that would permit private sector defined benefit schemes, when their sponsors are in serious financial difficulties, to pay lower increases than may currently be required by scheme rules.
Key findings in the report
The ACA survey, which was conducted over the summer and received responses from 349 employers of all sizes, found:
Around 70% of employers say the Pensions Regulator needs more powers to help protect defined benefit schemes, but 72% feel those powers should be targeted on unscrupulous employers as a priority rather than toughening the funding code of practice for all.
66% say a tougher approach to funding would increase conflict with the Pensions Regulator’s ‘sustainable growth’ objective, with 62% saying more specific guidance would undermine scheme specific funding.
55% of employers feel the cost of their DB scheme is adversely impacting on their business performance, with 84% calling for a legal change in the upcoming Pensions Bill to permit DB schemes to pay lower annual increases in pensions where those provided for under scheme rules will severely and adversely affect the employer.
61% of employers say schemes should be required by legislation to provide data to the Pensions Dashboard, with just 19% favouring more than one dashboard.
The survey also found that the incidence of members’ transfer requests from defined benefit schemes was 6 points down on last year’s figure (41% of schemes have experienced 5% or more members seeking a transfer request this year), but with completed transfers remaining at a similar level to last year (18% of schemes experiencing 5% or more employees completing a transfer).
ACA Chair, Jenny Condron, commented: “The Pensions and Financial Inclusion Minister, Guy Opperman, made it clear last week that next year’s Pensions Bill – if it gets the go ahead from business managers – is likely to be the last for some time to come. Our survey findings stress that it’s important that the Bill is proportionate to the problem and that, yet again, we do not have a raft of complex legislation and additional regulation that adversely impacts on the funding and administration of thousands of well-run schemes, rather than focusing on the few errant ones that hit the headlines. It’s not yet clear that message has got through to Government.
“Our survey found employers seem happy to see rogue directors or trustees pursued much more vigorously than has been the case to date, but they are far from convinced that a radical re-writing of the scheme funding code for defined benefit schemes is justified. Targeted action would seem to be the priority not an ‘en masse’ change.
“On scheme flexibility, employers are clearly disappointed that the recent DB White Paper seemed to rule out the ability of more schemes to move to lower annual increases in pensions in circumstances where the sponsoring employer is in serious financial difficulties. This seems to be a sensible reform and one the Government has widely followed itself across public sector schemes. It seems totally unreasonable that private sector employers continue to be discriminated against and we trust the Government will think-again on this sensible reform”, said Jenny Condron.
Further reports on the Pension trends survey’s findings are due to be published over the next two months.
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