Pensions industry urged to 'engage actively' with DB funding regime proposals

The pensions industry should "engage actively" with the government and regulators to help shape The Pension Regulator's (TPR's) new defined benefit (DB) funding regime, according to Lane Clark and Peacock (LCP) partner, Jonathan Camfield.

He noted that the implications of the new rules for DB pension schemes and sponsors, which are still subject to a further round of consultation before being finalised, remained uncertain.

Considering this uncertainty, he warned that it could be challenging for trustees and sponsors to work out the best course of action in relation to their scheme.

In particular, Camfield highlighted concerns on the overall cost of the new regime, noting that MPs and peers have been asked to vote without a clear indication of the increased cost to sponsors.

This follows previous LCP analysis, which warned that sponsors for the largest schemes could be faced with a £100bn bill under the new regime, a potential £35-40bn increase.

Camfield also raised concerns around the timing of the new regime, and whether the treasury will apply pressure to the Department for Work and Pensions (DWP) and the regulator to slow down the implementation of a tougher regime.

He questioned whether the ‘bespoke’ funding regime will be "bespoke enough" to match the diverse range of DB schemes, such as open schemes or those run by charities.

Industry experts have previously called for greater flexibility in the code, with particular concerns raised around avoiding a fast track default and the potential need for a third option to be included alongside the fast track and bespoke routes.

Camfield also warned that whilst that Pension Schemes Bill will become an act in the coming weeks, there is still much to be decided in the detailed regulations which are yet to be published.

He added: “Passing this legislation is only the start of a journey which still has a very uncertain destination.

“We still do not know how much the new regime will cost, when it will be implemented or how flexible it will be.

“The whole industry needs to engage actively over the coming months with government and regulators to help shape the new rules to make sure they are fit for purpose”.

In response to the comments, a DWP spokesperson said: “Employers and schemes who are already following good practice and planning for the long term should not need to change what they are doing.

"It is only right that those employers who have not been funding schemes sufficiently may have to pay more.”

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