UK - The Pensions Regulator has today confirmed it will continue to assess the health of defined benefit schemes with the use of funding triggers to help it prioritise its workload.
The new funding approach follows an industry-wide consultation launched in October 2005 after the Regulator set out its initial framework. The triggers were designed to allow trustees and employers to agree funding arrangements that match the individual circumstances of the scheme.
According to the Regulator, there had been little disagreement with the broad suggestions for the use of filters or triggers but criticism had been made over how flexible the trigger system would be.
The Confederation of British Industry had claimed the proposed triggers were too rigid and voiced concern that trustees would not appreciate the triggers were not hard and fast rules.
A spokesman for the Regulator accepted it had been an issue for debate.
He said: “Previously there has been some confusion over the triggers being funding targets but they are in fact an indication of the types of schemes we may look at. The triggers will give us an idea of who to pay more attention to but naturally they will be specific to each scheme.”
Nigel Bodie (pictured), a senior consultant at Watson Wyatt broadly welcomed the Regulator's statement and added: “Our analysis shows that many schemes will set off these triggers, and will enter a dialogue with the Regulator where factors such as the strength of the employer covenant and the maturity of the scheme will be taken into account. Our only concern is whether the Regulator will have the resources to analyse these complicated issues for so many schemes.
In addition the Regulator said it would make clear it will be flexible when considering the length of recovery plans. It will retain a ten year trigger for recovery plans but claimed this trigger is not a target or standard for the length of the recovery plan.
By Daniel Flatt
This week's top stories included Legal & General acquiring MyFutureNow to provide a dashboard service to customers, while also agreeing a hybrid buy-in with a Hitachi scheme.
NEST has signed up to the government-backed Star Initiative, taking all of its 8 million members' pension pots with it.
It is perhaps inherently difficult to find an agreed definition of value for money, but some methodologies could act as a stopgap, argues Jonathan Stapleton.