Fears of a defined benefit pension scheme funding crisis are nonsensical and hysterical, the Pensions Regulator has said. By Gill Wadsworth
Speaking at the Corporate Adviser Summit executive director for regulatory policy Andrew Warwick-Thompson said UK DB schemes faced no funding crisis and that concerns about widespread bail outs had been dramatically overplayed.
Warwick-Thompson said: “The Regulator is strongly of the opinion that there is no general systemic affordability issue with DB schemes. Quite frankly a lot of what has been published borders on the hysterical and nonsensical.”
He said the the regulator had revisited its calculations in the March annual funding statement and updated figures in the light of the Brexit vote in June. Even following further falls in bond yields, TPR claimed sponsors could maintain or even exceed contribution schedules.
“We were clear in the annual funding statement in March that in the majority of cases companies could afford to maintain current recovery plans. We recalculated to the end of August post-Brexit and while the numbers changed, sponsors can still meet recovery plans.”
Warwick-Thompson went on to defend the strength of the Pension Protection Fund, which picks up DB liabilities when sponsors go bust, saying just 2% of the total DB liabilities posed a threat to the lifeboat scheme.
“The talk of a crush of schemes that will overwhelm PPF is absolute rubbish; it is simply not true. There is no crisis that will cause huge numbers of employers to fail and their numbers won’t overwhelm [the PPF],” Warwick-Thompson said.
TPR’s confidence in the PPF and its ability to absorb failed schemes is in contrast to the mood amongst policymakers earlier in the year when a rescue deal was agreed with Tata Steel to avoid seeing its £700m fall under the lifeboat’s responsibility.
The regulator and PPF also face ongoing threats from the collapse of retailer BHS.