Business leaders and trade unions have joined together to criticise the Pensions Regulators draft guidance on defined benefit funding for taking a too rigid approach that is likely to encourage trustees towards excessively prudent choices.
In a joint letter to the regulator, the CBI and the Trades Union Congress set out their concerns about the current draft guidance on funding.
A TPR consultation on DB funding closed on February 7. It included a draft funding code providing practical guidance to help pension trustees meet legislative requirements and a draft strategy setting out its future approach to regulation.
These are intended to help pension trustees understand and manage risk in their schemes.
But the CBI and TUC claimed in their response to the consultation that: 'The draft code of practice risks preventing the objective from being implemented successfully. The TUC and the CBI agree that the regulator's current guidance takes too rigid an approach and is likely to drive trustee behaviour towards excessively prudent funding of schemes.
'We are concerned that, far from minimising risk, the regulator's approach may increase the chances that employee benefit rights cannot be met.'
Both bodies called for greater flexibility to encourage cooperation between businesses and trustees and to allow individual solutions to be found for each pension scheme.
They also stated that they were keen to ensure schemes were not driven towards unnecessary de-risking.
TPR's interim chief executive Stephen Soper said: 'The principles in our new draft DB code of practice are designed to encourage better dialogue between employers and scheme trustees in order that plans can be agreed that better manage risk and facilitate growth in the employer.
'It is our role to balance the needs of employers, members and the Pension Protection Fund. In the vast majority of cases, there should be no conflict between these objectives as a thriving business is in everyone's best interests.'
The majority of concerns expressed in consultation responses could be added, he added. The finalised code and regulatory strategy would strike the right balance when published in early May, said Soper.
The CBI represents 240,000 businesses and the TUC speaks on behalf of 6.2 million workers.