Barnett Waddingham (BW), the leading UK professional services consultancy, shares its perspective on the latest Annual Funding Statement from The Pensions Regulator.
Mark Tinsley, Principal at Barnett Waddingham comments:
“This year’s statement is notably bland, especially given the prevailing economic and geopolitical uncertainty. In previous years, similar levels of uncertainty might have prompted far more extensive guidance. That such a restrained approach has been taken this time speaks volumes about the current healthy funding landscape, with the Regulator estimating that over half of schemes can afford to buyout.
“The statement rightly includes a brief reference to the evolving issue of pension scheme surpluses and surplus extraction. Encouraging trustees to proactively engage with these matters is a good suggestion, ensuring that all potential opportunities are carefully considered before locking a scheme into a risk transfer arrangement.
“On the topic of the new funding regime, schemes currently undertaking or preparing for valuations will welcome the reassurance that Fast Track parameters will remain unchanged. However, by maintaining the parameters in the current unusual market conditions, there is a risk of the Regulator backing itself into a corner for future assessments.
“The detailed technical clarifications on covenant considerations provide useful guidance. However, the complexity and volume of the guidance illustrates the stark juxtaposition of the new regime—at a time when three out of four schemes are fully funded on a low dependency basis, paradoxically, the burden on trustees and sponsors has never been heavier.”
