The Pensions Regulator (TPR) has released a second statement to UK employers who sponsor final salary pension schemes with advice regarding the current economic conditions.

The statement, released on 18 February 2009, reassures employers that the current scheme funding regime is sufficiently flexible to cope with the economic downturn, and highlights that there is scope for pressurised sponsor companies to look at renegotiating previously agreed plans to repair pension deficits. The statement to trustees of defined benefit (DB) says that deficit recovery plans that have a duration of longer than ten years "trigger greater scrutiny", and this means the Regulator is likely to take a closer look at the scheme arrangements.

The Regulator also said that trustees should be in a position to understand what is within their grasp in terms of affordability for their sponsor. However, all unsecured creditors, it said, must be treated equitably and the pension scheme must not be disadvantaged. The Regulator also pledged to continue to apply the flexibilities in the scheme funding system pragmatically, and will continue to look for outcomes that are in the best interests of the scheme and sponsor.

TPR reassures members on DB funding regime"Trustees of pension schemes in deficit are unsecured creditors of their sponsoring employer," said David Norgrove, chairman of TPR. "We are sensitive to the pressures many of these employers face in current economic conditions with falling asset prices and increasing deficits. There is no reason why a pension scheme deficit should push an otherwise viable employer into insolvency. But the pension scheme recovery plan should not suffer, for example, in order to enable companies to continue paying dividends to shareholders."

Norgrove added that any employer who believes that any existing recovery plan is at "serious risk of jeopardising the company's future health or solvency" should turn to their scheme trustees and discuss the matter, and TPR is encouraging schemes and sponsors to approach them should they have any concerns.

The announcement has been received with mixed reactions within the industry, with Aon Consulting's Marcus Hurd, head of corporate solutions, concerned that many UK businesses will not be at all benefitted from the announcement since they are currently struggling to keep their "heads above water.

"At a time when many companies are desperate for cash, making alternative pension arrangements is one way to alleviate the strain. Pension schemes are long-term investments and companies are strapped for short-term cash. So it makes sense for companies to consider pension schemes in order to free up liquidity."

- Pensions Age February 2009

Share Story: