UK - The draft code of practice on pension scheme funding published this week represents the UK's "most radical ever" change to the way in which trustees and companies determine scheme funding, says Aaron Punwani, partner and head of trustee consulting at Lane Clark & Peacock.
“The impact on the level of contributions to pension schemes will take time to emerge, but there is no doubt that the pressure will be upwards,” he said.
“The regulations also require much more actuarial and financial information to be provided to trustees and scheme members. Whilst greater understanding of the factors affecting the scheme’s finances and members’ benefit security is clearly a good thing, information overload could end up reducing understanding rather than improving it.”
Commenting on the regulations, which are to replace the minimum funding requirement, Mercer Human Resource (HR) Consulting said trustees will need to change their approach to scheme funding in order to comply.
The new regulations will require trustees to set out a statement of funding principles governing contributions by employers and employees. This document should be similar to the current statement of investment principles, which shows how funds are to be invested.
“Pension scheme funding objectives and investment policies are closely related,” said Tim Keogh, head of pensions research and Mercer partner.
“There is little point in trustees thinking hard about where they want to get to without thinking about how they are going to get there.”
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