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Pensions Regulator’s Move To Tackle Deficits ‘Cautiously Welcomed’ By Expert

Lawyer Comments On Decision To Relax Rules


A pensions expert has claimed proposals to tackle deficits and shortfalls in funding by relaxing rules governing company scheme valuations between September 2011 and September 2012 are a positive step to provide more clarity, though hopes for more leeway on gilt discounts rates have been dashed.

The Pensions Regulator has made the announcement, which will affect the savings of around 600,000 people, as a step towards providing more support to firms which have struggled in recent months.

It has come after funding levels have been struck by the Bank of England’s Quantitative Easing measures, which have led to low gilt yields that drive up liabilities and therefore impact on funding levels.

Under the changes, employers will be able to take more time to top up funds and also pledge assets other than money, including property, to the schemes.

Nigel Bolton, a Leeds-based Partner at Irwin Mitchell who advises on pensions issues, said that the move was a positive step but not one which will be wholeheartedly backed by the industry.

He explained: “The plan of action announced by the Pensions Regulator is essentially recognition of the significant impact that quantitative easing has had – and continues to have – on a huge number of pension schemes.

“While it is undoubtedly a step towards improving the situation that so many schemes are facing, it is true that many may be disappointed. Some may argue that the move is not as generous as they would have hoped for, with some holding out hope of more extensive support to get funding levels on the right track.

“The Pensions Regulator’s view on this is simply that it would not be ‘prudent’ to second-guess market movements and assume an improvement in gilt yields over the short-term.

“However, ultimately this is a move to be cautiously welcomed as it could play a role in helping a number of schemes to tackle the deficits they have to deal with. Ultimately, the acid test will occur as scheme valuations are submitted.”