The Pensions Regulator has indicated that it will be robust in determining whether a sponsoring employer is genuinely unable to afford increased deficit-reduction contributions. In determining this, the Pensions Regulator will seek to ensure that the competing demands of a sponsoring employer are treated equitably, such that other stakeholders (for example, other creditors and shareholders) are not advantaged at the expense of the pension scheme. As such, the number of pension schemes in respect of which the Pensions Regulator will accept longer recovery plans is likely to be significantly lower than the third of 6,500 defined benefit occupational pension schemes at which the guidance is aimed. Indeed, some commentators estimate that this number will be around 300.
Broadly, we believe that the Pensions Regulator’s guidance is helpful for both sponsoring employers and trustees, particularly given the difficult financial conditions which currently prevail. As ever, the devil will be in the detail, so each pension scheme’s funding will have to be considered on its own circumstances.
The full version of the Pensions Regulator’s annual funding statement can be found here.
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