UK - Prolonged consultation on changes to the minimum funding requirement could trigger a surge in final salary scheme closures, senior figures have warned.
The government announced in its Green Paper that it will “strengthen protection for members whose solvent employer chooses to wind up a scheme” – but it provided no timetable for reform.
NAPF benefits director David Astley said smaller companies which are “strapped for cash” may see the Green Paper consultation period as a final window to wind-up their final salary schemes.
He explained that many firms had fears that trading conditions might become more financially difficult in the future.
PricewaterhouseCoopers partner Peter Tompkins agreed that proposals in the Green Paper could trigger a surge of scheme closures.
“Things aren’t going to get easier.
“There is a view that if you are thinking of pulling the plug on your final salary scheme you do it now.”
But Hymans Robertson head of actuarial practice Ross Russell said a rush of companies winding up their schemes could trigger an early change in the MFR.
“It would be dangerous and irresponsible for firms to pounce and wind up their schemes now.
“If they decide to get out by voluntarily triggering a wind-up without having enough money to meet members’ benefits there will be a whole new wave of people not getting their full benefits.
“This would force the government to take immediate action and make funding requirements worse for everyone.”
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