TPR: Distressed small DB schemes 'will not break PPF'
Small defined benefit (DB) schemes will not cause serious harm to the Pension Protection Fund (PPF) if their employers go insolvent, Andrew Warwick-Thompson has said.
Meanwhile, mandatory clearance for mergers and acquisitions (M&As) would not "viable", The Pensions Regulator (TPR) executive director added.
The comments were made during a live Professional Pensions question and answer session with the watchdog on Twitter on 1 February.
Responding to a question from First Actuarial director Henry Tapper on whether DB schemes were "doomed", Warwick-Thompson said: "No. The majority of sponsors can support their schemes.
"A minority - mainly small schemes - are distressed. Not all of these will fail and those that do will not break the PPF."
This is despite the regulator stating it believes the aggregate deficit of UK DB schemes is around £400bn on a scheme-specific basis in November last year. Warwick-Thompson said this figure is "the most relevant for the majority of schemes".
He also said enforcing mandatory clearance for mergers and acquisitions (M&As) where a DB scheme may be in danger would not be possible.
In response to a question from Punter Southall Transaction Services, he said: "We can see the case for increased engagement of trustees and TPR for corporate transactions in certain circumstances.
"However, we recognise that this could be burdensome and that mandatory clearance across the piece is unlikely to be viable," he continued. "More work and discussion with industry is needed to look at the options that best meet the policy aims."
The regulator's executive director also agreed with pensions minister Richard Harrington, who on 1 February told the TUC conference proposals on how to do this would be included in the upcoming green paper.
Warwick-Thompson commented: "We continue to believe that scheme consolidation could yield tangible benefits and is an area that is worth exploring further.
"It's also an area that many other stakeholders have supported. However, there are several issues and options that would need to be worked through to ensure that we understand the best approach to meeting the policy aims."
A JLT Employee Benefits white paper published on 31 January estimated DB consolidation could cut scheme costs by as much as £500m each year.
Read all of the questions and responses on Twitter, using #AskTPR.
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