Most back new pension funding rules

Over two thirds of pension professionals, or 67 per cent, expect The Pension Regulator’s (TPR) new defined benefit (DB) funding code to positively impact their schemes, according to research from Aon.

The survey data revealed that just 9 per cent thought the new code would have a negative impact, while the majority were optimistic about its effects.

Aon’s research found that 53 per cent of respondents planned to adopt the bespoke approach for their next valuation, 19 per cent would opt for the fast track approach, and 28 per cent were unsure.

Aon partner Paul McGlone noted that the views of respondents were based on an expectation that the code would provide greater clarity and guidance while maintaining flexibility.

McGlone said: “The views so far are based on an expectation that the code will provide greater clarity and guidance while maintaining flexibility – so we need to see whether it delivers that.”

The Pension Regulator plans to begin consultation on the revised DB funding code in March, with the aim of introducing clearer funding standards and making schemes focus on the long-term.

McGlone noted that the majority of respondents had been trustees or professionals supporting trustees, whose views “are more likely to be aligned with those of the regulator”.

He expected companies and sponsors to be “more cautious” in their views on the new code.

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Smaller schemes, which are expected to be more likely to use Fast Track, “tend to be under-represented at industry events”, McGlone said.

McGlone said that the actual consultation is expected very soon and that the key thing to look out for will be clear definitions of the two approaches.

He raised questions about how realistic it will be for large numbers of schemes to achieve Fast Track and how close to Fast Track bespoke approaches will have to be.

McGlone also raised concerns about how enforcement of the new code will work, given that there were no new powers relating directly to scheme funding in the Pension Schemes Bill.

The data was gathered from 300 conference attendees in Manchester and London, providing a snapshot of industry views on the new code.

As the consultation approaches, the industry will be watching closely to see how the new code will be implemented and what impact it will have on pension schemes.

They expect the new code to provide greater clarity and guidance.

The outcome of the consultation will be key for the future of pension schemes, particularly in terms of consolidation risks and their impact on the industry.