The Pensions Regulator will have a new statutory obligation to have regard to the growth prospects of employers when agreeing pension scheme deficit reduction plans, the chancellor has confirmed in today’s Budget.
Chancellor George Osborne said the government is taking action across the economy to shift the balance of regulation in favour of private sector investment and growth.
The Government will provide The Pensions Regulator with a new objective to support scheme funding arrangements that are compatible with sustainable growth for the sponsoring employer and fully consistent with the 2004 funding legislation. The precise wording of this new objective will be set-out in legislation that DWP will publish later this spring.
Osborne said in his Budget speech: “We’re putting new controls on what regulators can charge, and giving the Pensions Regulator a new requirement to have a regard for the growth prospects of employers.”
The Pensions Regulator chairman Michael O’Higgins says: “We regulate according to the legislative framework set by Government and Parliament.
“In light of the Government’s proposal for a new objective to take account of the sustainable growth plans of the sponsoring employer, we will make the changes required, building on the 2004 funding regime, as part of a review of the Code of Practice for DB Funding that we will launch as soon as possible this year.
“In addition, we will shortly publish an annual funding statement which will set out our guidance to trustees in the context of current economic circumstances, including the flexibilities available to trustees and company sponsors in the current regime, particularly the freedom to choose the basis on which contribution levels and valuations are calculated.
“We will engage fully with stakeholders and the industry on both the revision of the Code of Practice and the next annual funding statement.”
Kevin Legrand, head of pensions policy, Buck Consultants says: “Although the Regulator currently does in many cases take account of the position of employers when reviewing deficit funding plans, the existence of an obligation to do so will ensure that it is considered, consistent and at the same level of importance as the other obligations. Buck has been arguing for this for some time and we support the chancellor on this.”