The Pensions Regulator has said that although defined benefit pension schemes are “scary” and “frightening” they are still affordable and there is no crisis.

Speaking at the Pensions Age Autumn Conference yesterday in London, TPR executive director for regulatory policy Andrew Warwick-Thompson noted that there has been several high profile cases that have driven media attention in relation to the health of DB schemes.

These include the BHS pension scheme, the British Steel Pension Scheme and the Bernard Matthews scheme, which have all been put in vulnerable positions due to their sponsoring employers.

Warwick-Thompson said that TPR has the best data on pension schemes, as all schemes have to submit a scheme return. He reassured trustees that analysis of the data by TPR has found that most employers with DB schemes will be able to meet their long-term financial obligations.

“We do not believe that there is a pensions crisis,” he stated.

However, he said that they know it is getting harder because of the investment environment and the cost of securing pensions is getting higher, producing some “very scary numbers in terms of pensions deficits”.

Warwick-Thompson noted that these headline figures that are in the trillions are based on buyouts and as insurance companies base their buyout prices on bond yields, which have fallen, it means prices have gone up making deficits look like they are in the trillions.

“What the trustees look at, what the employers look at, what they negotiate about and what they decide will be their deficit recovery contributions stand at about £320bn. That’s still a big number but it’s not unaffordable.”

He acknowledged that there are around 17 per cent of companies with DB schemes where the company itself is distressed, which means there is a problem. However, he said that of the 17 per cent several have parent companies that will be able to help out.

In addition, he also said that the regulatory and legislative system isn’t broken as it is operating “exactly as parliament intended”.

“You have trustees and employers working together to deal with their deficits, you have the regulator standing behind them if they fail to agree and if things can’t be resolved and the company fails you have the PPF, and schemes fall into the PPF, that’s not a disaster, that’s the system that was put in place in 2004.”

Despite this, he said TPR has written to parliament to suggest how the system could be tweaked to improve it.

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