Wednesday 5th December 2012
Commenting on today’s statement by the Chancellor of the Exchequer that the Department for Work and Pensions will consult on changes to the pensions scheme funding regime.
Mike Smedley, pensions partner at KPMG in the UK, said “We do hope that this consultation can be undertaken quickly. Companies and trustees are now starting to plan for their 2013 valuations, and any uncertainty over the regime under which they are to be conducted will delay decision-making.
“However we wonder if the first part of the consultation will be likely to lead to much change in practice. The Pensions Regulator already looks at affordability when considering deficit recovery plans. Without some new hard parameters being set out, it does not appear that such a new high-level objective would do much to change the status quo.
“The consultation on allowing for smoothing of asset and liability values will no doubt give rise to a heated debate. There are strongly-held views across the pensions industry both for and against the present mark-to-market approach. A simple smoothing approach is not without its problems, as shown by the PPF’s latest calculations for its levy on schemes, where even with a five-year smoothing approach they have seen a large rise in scheme deficits.”
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