The CBI and the TUC have sent a joint letter to the Pensions Regulator, emphasising concerns over the latest draft Code of Practice for funding defined benefit pension schemes.
The CBI and TUC believe DB scheme deficits are restricting business growth and investment across the UK, and threatening workers’ pension benefit rights. The CBI has long campaigned for a new objective for the Pensions Regulator to ensure an employer’s need for growth is considered during scheme funding negotiations, and is properly reflected in trustees’ dealings with the employer.The objective is currently under consultation with a view to implementation this year.
In the CBI’s recent pensions survey, 70% of employers said DB deficit funding costs are having an impact on business investment and nearly half (46%) of companies stated funding requirements are affecting their ability to borrow.
The CBI has called for a new statutory objective which would help ensure employers are able to balance the need to invest and grow their business with the need to fund their pension schemes. A strong employer is more likely to pay members’ benefits in full than an employer who, through burdensome regulation, cannot expand their business.
Both the CBI and the TUC agree that the Regulator's approach does not go far enough, and both organisations are concerned an opportunity is being missed.
Neil Carberry, CBI Director for Employment and Skills, said:
“The statutory objective was designed to ensure that trustees and businesses could foster strong companies and healthy pension schemes. We are concerned that this intent is not sufficiently reflected in the draft Code of Practice because the Regulator is trying to force schemes to artificially reduce risks in a way that will divert necessary cash away from business investment.
“The Regulator must ensure its approach allows employers and trustees to balance investment for growth with the need to fund schemes and reduce risk.”
TUC Assistant General Secretary Kay Carberry said:
“A strong sponsor is the best guarantee of a defined benefit pension. The Regulator needs to get the right balance between the health of the scheme, the interests of the sponsor and protection for the PPF.”
The Pensions Regulator’s interim chief executive, Stephen Soper, said:
“The principles in our new draft DB Code of Practice are designed to encourage better dialogue between employers and scheme trustees in order that plans can be agreed that better manage risk and facilitate growth in the employer.
“It is our role to balance the needs of employers, members and the PPF. In the vast majority of cases, there should be no conflict between these objectives as a thriving business is in everyone’s best interests.
“The Pensions Regulator is grateful for all feedback to our consultation. I believe that the majority of concerns can be addressed, ensuring that the finalised Code and regulatory strategy strike the right balance when we publish them in early May.”
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