Regulator sets scene for 2012 DB communications

The Pensions Regulator today sets out in more detail its plans for communicating with the pensions sector on defined benefit (DB) issues in coming months.

Executive director for DB regulation Stephen Soper announced that the regulator plans to issue a statement in April to help trustees dealing with the valuation and recovery plan process in the current economic climate. The regulator plans to publish a statement each year setting out its stance.

Speaking at the National Association of Pension Funds trustee conference in Glasgow, Mr Soper said:

“During the past four years of economic turbulence, the scheme specific funding regime has provided the flexibility necessary to support sponsoring employers and trustees to find appropriate funding arrangements that protect the scheme – as well as being affordable and reasonable for the employer. The economic conditions at each valuation date are unique and trustees will need to consider the impact of these on their valuation and recovery plan closely.

“With this in mind, in April we will publish a statement that will set out our expectations of those trustees starting their valuation process at the present time. We plan to make this an annual statement, helping trustees to understand our expectations within the prevailing economic conditions. By publishing a contemporaneous statement in this way, it is also our hope that when we start to receive recovery plans for this group of schemes, fewer will require in-depth scrutiny or challenge from us.”

In respect of recent changes in legislation, Mr Soper added that the Pensions Act 2011 has amended the statutory time limits for reaching decisions on the use of the regulator’s anti-avoidance powers. This may allow parties a greater window of opportunity to make representations in certain cases.

The regulator plans to consult with the industry in April on the procedures that its case teams follow as they bring a case to the regulator’s Determinations Panel. Alongside this, the Determinations Panel will also consult on an updated version of the procedures it follows for making a determination on a case.

Later in the year, the regulator intends to set out its strategic view on how it will regulate the DB landscape in the future.

Mr Soper added: “We have already indicated a more segmented approach to regulation, where we would take a greater interest in schemes that fall into more risky segments - such as those schemes with a very weak employer covenant. In contrast we would expect to have less intensive interaction with those better funded schemes with stronger employer support.”

1. The Pensions Regulator is the regulator of work-based pension schemes in the UK. We have objectives to: protect members’ benefits; reduce the risk of calls on the Pension Protection Fund (PPF); and promote good administration and improve understanding of work-based pension schemes. From 2012 we will have the additional objective of maximising employers’ compliance with their duty to automatically enrol staff into a qualifying pension scheme.
2. The Determinations Panel is a committee of the regulator which makes decisions whether to use certain regulatory powers, including the anti-avoidance powers. For more information see our information for journalists: A quick guide to determinations.

• Ben Lloyd 01273 62720
• Katherine Long 01273 811859
• David Hannant 01273 811824
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• www.thepensionsregulator.gov.uk