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
HMRC has confirmed providers operating relief at source pension schemes can continue to collect automatic tax relief at a basic rate of 20% under new Scottish Income Tax rules.
The Pensions Regulator (TPR) is seeking "improved" powers to set a schedule of contributions in defined benefit (DB) schemes in the government's upcoming white paper, it has revealed.
New regulatory rules which require providers and advisers to produce annuity illustrations will not solve the problem of consumer detriment as they are "fundamentally" flawed, according to Retirement Advantage.
Paul Budgen is set to join financial technology and auto-enrolment (AE) firm Smart Pension as director of business development.