United Kingdom

Details

  • Service: Tax, Pensions
  • Industry: Financial Services
  • Type: Press release
  • Date: 10/06/2014

Pensions Regulator redresses the balance in Defined Benefit pension funding 

  • New Code of practice places more weight on maintaining a strong pension plan sponsor
  • Facilitates a more collaborative approach between employers and their pension schemes
  • Likely to lead to some reductions in employer deficit contributions

 

In response to the Pensions Regulator‘s Code of Practice on funding defined benefit pension plans, which was announced before Parliament today,  Mike Smedley, pensions partner at KPMG, commented:

 

“We welcome this new, more balanced approach from the Pensions Regulator.  In particular the Regulator recognises that a strong employer is the best security for pension scheme members; as well as being good for employees and the economy generally. This is more appropriate than driving pension funding to ever higher levels.  Particularly when the market conditions that pension schemes are struggling with – such as quantitative easing – may be temporary.

 

“To illustrate the change in tone, parts of the Regulator’s old guidance stated that deficits should be met “as quickly as reasonably affordable”.  But now, deficit recovery plans should be “appropriately tailored to the scheme and employers’ circumstances”.  Consequently, a strong employer will no longer be under pressure to meet a deficit very quickly at the expense of investment in the business.

 

“In practice most employers and pension schemes already reach a fair and balanced outcome on pension funding.  But current guidance can lead to a lengthy process, with the Regulator’s rhetoric making discussions more difficult.  Hopefully the new Code will enable a more collaborative approach between employers and their pension schemes.

 

“We also expect that in some cases employer contributions towards deficit will reduce - particularly where the current Regulator’s guidance has led to higher levels of contributions than were strictly necessary.

 

“The new approach should lead the Regulator to be more discerning with its interventions; focussing on those schemes where there is a real risk to members’ benefits or where trustees and employers are unable to agree.”

 

-Ends-

 

Notes to editors:

For further information please contact:

Simon Chan, PR Assistant Manager, KPMG

Tel: +44 (0) 207 694 2024

Mobile: +44 (0) 7747 564 737

Email: simon.chan2@kpmg.co.uk

KPMG Press Office: 020 7694 8773

 

About KPMG

KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and operates from 22 offices across the UK with approximately 11,500 partners and staff.  The UK firm recorded a turnover of £1.8 billion in the year ended September 2013. KPMG is a global network of professional firms providing Audit, Tax, and Advisory services. It operates in 155 countries and has 155,000 professionals working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity.  Each KPMG firm is a legally distinct and separate entity and describes itself as such.

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