Fifth of trustees expect or have received regulatory intervention – Hymans Robertson

Over a fifth (22 per cent) of pension trustees have been subject to or expect to receive regulatory intervention from The Pensions Regulator before their next valuation, according to research by Hymans Robertson.

Hymans Robertson has used information from TPR’s latest Funding Statement to create a benchmark report for the DB universe. TPR had graded schemes into one of five categories (A-E), after taking covenant strength, scheme maturity, recovery plan length and funding targets into account.

The analysis by the leading pensions and risk consultancy found that only half of DB schemes are in the strongest category (A) while a significant proportion, 21 per cent, are in the weakest classifications (D and E).

Those schemes which have been graded as weaker are therefore more at risk of receiving regulatory intervention from a stronger TPR.

Commenting on how trustees and sponsors should use this information, Hymans Robertson partner, Laura McLaren, said: “It’s striking that just over a fifth of trustees are actively expecting or have already experienced some kind of regulatory intervention from The Pensions Regulator.

“Additional scrutiny and change is on the horizon in the form of a new DB funding code, as well as stronger regulatory powers for TPR, and we expect that most trustees and sponsors will now have to work harder to demonstrate they have a clear funding plan in place.”

Furthermore, she said that this year’s Funding Statement was the clearest to date TPR has been on its regulatory expectations for DB schemes.

“Trustees and sponsors should make sure they continue to pay close attention for more information on the exact form the regulator’s new framework will take and the additional powers they may have. Fairly straightforward steps such as understanding how a DB scheme compares to others and crucially, how it may be perceived by TPR, will be advantageous.

“For example, this may allow schemes to prioritise any required changes and identify where they might be taking unnecessary levels of risk. By addressing these areas early, trustees and sponsors will be in a stronger position and more likely to avoid unnecessary intervention.”

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