The Pensions Regulator has published its annual funding statement for occupational defined benefit (“DB“) pension schemes. The statement is relevant for trustees and employers making decisions on scheme funding. It provides wider guidance on covenant monitoring due to the impact of COVID-19 and climate change risks. It highlights the need for employers to
The Pensions Regulator recently published guidance for supervising the consolidation of defined benefit pension schemes into superfunds. The guidance provides an interim framework for the regulation of superfunds, prior to a statutory framework being put in place.
It’s a step towards establishing a superfund industry which could be a viable endgame option for certain schemes in the future.
Consultation on RPI/CPI changes delayed
Judged to be to be a “poor measure of inflation” by the UK Statistics Authority (UKSA), its view is that before the Retail Prices Index (RPI) is scrapped, it should be aligned with a variant of the Consumer Prices Index which includes owner-occupier’s housing costs (CPIH).
Although the Government rejected the proposal to remove RPI, it agreed to consult on whether to align CPIH with RPI and the timing of this. It confirmed that no change will be implemented for five years (before February 2025). The Government also confirmed that its objective is for CPIH to become its headline measure over time but was silent on whether it might start to issue CPI-linked gilts.
The possibility of a Pensions Bill in the next parliamentary session should provide clarity on the funding framework for defined benefit (DB) schemes.
The Government’s white paper in March 2018 proposed that the Pensions Regulator should issue a revised code of practice focusing on how prudence is demonstrated when assessing scheme liabilities, appropriate factors for recovery plans, and ensuring that a long-term view is considered when setting the funding objective. Some or all of the funding standards contained in this revised code would be given statutory force.