The Pensions Regulator has launched a consultation into the future of defined benefit funding after it said there was a need to minimise the impact pension liabilities could have on employers expansion plans.
The regulator has today launched a consultation into new policies that it said would 'strike a balance' between pension funding obligations and firms ability to invest in sustainable business growth.
Interim TPR chief executive Stephen Soper said the revised policies recognised the 'changing circumstances' in the sector, which required a different approach between firms, such as those that are growing.
Earlier this year, a Department for Work and Pensions consultation highlighted concerns that the current low yield on government gilts was forcing some firms to make substantial additional contributions to their pension schemes to tackle rising deficits. It was feared that this was diverting funds away from business investment and ultimately, economic growth.
The regulator today published both a draft funding code to provide practical guidance to help pension trustees to meet the requirements of scheme funding legislation at different firms, and a draft regulatory strategy setting out its future approach for consultation. These would help pension trustees understand and manage risk in their schemes, the regulator added.
'Investing in sustainable business growth is central to being able to provide a long-term future for any business and its pension plan,' Soper said.
'The best support for a DB pension is a strong employer and effective trustees working together to manage and balance the risks to their business and scheme.
'Our revised code of practice emphasises the importance of pension trustees and employers working collaboratively to establish viable, long-term funding plans. We place a strong focus on education and enablement to help schemes to achieve appropriate outcomes,' Soper continued. 'The needs of employers and schemes can be reconciled in the vast majority of cases through good working relationships without the need for our involvement.'
Commenting on the consultation Raj Mody, pensions partner at PwC, said: 'The new policy basically boils down to three elements - a more transparent and contemporary approach from the regulator around its focus and key principles; a requirement for trustees to be balanced in their decision-making, including not unreasonably impacting on the employer's sustainable growth plans; and an expectation that employers will work collaboratively with trustees so decisions can be made in a connected and consistent way.'
TPR said the revised code and strategy, which would replace the existing arrangements that have been in place since 2006, was likely to be in place by July next year. The consultation will end on February 7.