UK - Occupational pension schemes are in need of around £100bn if they are to achieve the same level of financial security as the life assurance market, according to ratings agency, Standard & Poor's (S&P).
Andrew Campbell-Hart, a managing director at S&P, London, highlighted the credit gulf between the occupational pensions market and money purchase schemes:
The UK's combined occupational pension funds maintain a minimal level of free capital, he said.
This compares with the UK's regulated financial institutions, which boast a marketwide capitalisation of about £78bn.”
But he added that the market was faced with a “conundrum” - with many defined-benefit schemes closing due to their high operational costs, introducing further costs would make most funds “prohibitively expensive” to run.
Either [the market] must accept the fact that occupational pension funds offer a less secure but inherently cheaper option than their life assurance competitors, or it must find a half-way house between cost and security by making modifications to the existing system, he said.
Commenting on the impact of FRS17 and MFR on funds' corporate sponsors, Bob Ukiah, a director of S&P's corporate ratings, also said that FRS17 simply made the situation more transparent. Of greater significance, he added, was the effect of MFR - the Minimum Funding Requirement - on an entity's profit-and-loss account and cash flow, which, by increasing contributions to the scheme, could weaken the sponsor's rating. S&P also highlighted how the new accounting doctrines might also result in a reduced role for asset managers over time as pension funds adopt more conservative investment strategies.
By Madhu Kalia
The Pensions Regulator (TPR) and Labour MP Stephen Kinnock and will listen to the experiences of steelworkers when transferring their pensions away from the British Steel Pension Scheme (BSPS) next week in Port Talbot.
Just Group has acquired a 75% stake in the holding company of Corinthian Pension Consulting in a bid to strengthen its professional defined benefit (DB) advisory services.
The Pensions Regulator (TPR) has exercised its production order power under the Proceeds of Crime Act 2002 for the very first time as part of a fraud investigation.
The ITN Limited Pension Scheme has named Trafalgar House as its administrator for an initial term of five years.