A poll of UK defined benefit pension schemes shows many are no longer in support of The Pension Regulator’s (TPR) proposed funding code after a second look at its implications, according to Aon.
Aon asked schemes to vote for the impact the new funding code will have on running their pension schemes with 62% voting "tending to positive" and only 8% "tending to negative" in February. Following the consultation's opening in early March, however, only 47% have voted "tending to positive" while 20% voted "tending to negative".
UK retirement policy head Matthew Arends said: "There has been a noticeable change in sentiment from pension schemes over the last three months. We have seen a 12% change in schemes' responses from tending to positive to tending to negative - indicating some growing scepticism that the consultation will deliver on its intentions.
"What isn't clear is whether this is down to the pensions industry having had more time to digest the consultation, or whether it's due to current conditions. Either way, it is likely to be a concern for TPR."
Schemes which responded to the consultant's poll prior to the consultation said TPR's multiple uses of fast track compliance may risk unintended consequences for schemes. Employers and schemes can opt for either a "fast track" or "bespoke" approach to how they deal with TPR.
Approximately 20% of schemes would already pass fast track compliance, Aon said, with that proportion rising to 37% if schemes were included where they fail on only one of the nine tests. These findings accord with schemes' own views of whether they are likely to use fast track compliance at their next valuation - this stood at 27% in Aon's February polling.
Arends said: "It's good news that approximately one in five pension schemes look able to take advantage of a reduced regulatory burden through fast track compliance once it comes into force. This ought to mean speedier and cheaper actuarial valuations in the future.
"However, more concerning is the implication that TPR will use the fast track tests for two other purposes: first as a yardstick against which to measure compliance under the alternative, Bespoke, route, and second, as the default outcome that TPR will be able to impose if it is not satisfied with the agreement that a company and trustee board reach."
Arends added that schemes' concerns that these are dramatically different purposes from the original intention of a simplified compliance option were justified.
"These are very different purposes from the original intention [and] we are concerned that these other uses for the fast track tests will have the unintended consequences of driving schemes' behaviours - ultimately encouraging adoption of a fast track approach even where it does not particularly suit the scheme's situation," he said. "This is what happened under the old minimum funding requirement regime and it ultimately proved detrimental to the whole pensions industry."
The Wales Pension Partnership (WPP) has appointed Robeco to run its voting and engagement services following a comprehensive procurement process.
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