Employee benefits firm Bluefin Corporate Consulting, part of Capita, is encouraging trustees to take heed of the underlying message of the Pensions Regulator on funding and focus on the future not the past.
Julie Stothard, Head of the Actuarial Practice at Bluefin, commented: “The initial industry reaction to the Regulator’s statement on funding in April was unnecessarily negative. By focusing purely on the issue of the likelihood of gilt yields recovering in the near-term, the critics of the statement missed the broader issues, and the clear understanding the Regulator has of those issues.
“The Regulator is quite rightly encouraging trustees to move towards a mind-set which is anticipatory rather than responsive. Trustees must address problems directly and engage actively with companies who will have a direct interest as ultimate sponsors of the scheme.
“There are many avenues that trustees should explore, including: revisiting transfer value assumptions; upgrading their investment monitoring and triggers; reviewing annuity purchase in light of high gilt prices; revising provision for supplementary funding based on employer profits; the use of escrow accounts; and even re-risking if the employer covenant has strengthened.
“There is a pressing need to move away from ‘vanilla’ recovery plans. The Regulator is clearly open to trustees adopting more sophisticated plans which not only focus on future assumptions but also put in place processes to adapt and respond if these assumptions are not borne out. Trustees should see this as an invitation to innovate and grasp the opportunity with both hands.”
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