Tiffany Tsang, Head of DB, LGPS and Investment, PLSA, said: “We are glad that the Regulator is listening, as the industry has raised some fundamental concerns about the impact of many of the proposals put forward last year including being too prescriptive in a number of key areas, the lack of clarity and interaction between the bespoke and fast-track approaches and the need for the differing circumstances of open schemes and closed schemes to be more fully recognised. We look forward to discussing more detail of the regulator’s thinking in the coming months as it continues to assess and update its approach to reflect both the very different times in which schemes and sponsors are operating and also the detailed concerns that have been raised.
“However, it is slightly disappointing that the publication does not clarify further – at this time – some of the misunderstandings the report notes have been made about the proposals. We now look forward to continuing our work with TPR on this in order to achieve the best possible outcomes for our members and, in turn, savers.”
Tyron Potts, Head of Pensions Research at Barnett Waddingham, said; "The interim response is very light on detail regarding the Regulator’s expected direction of travel, giving us little more to go on. Nevertheless, since the first consultation TPR has been open in commenting publically about the expected development of the new regime and so trustees and sponsors will already have a firm idea of their long-term funding objectives and end-game journey plans.
"Our analysis shows that most well-run pension schemes will be able to continue current plans under TPR’s new regime without a need for dramatic changes.
"Barnett Waddingham and others have highlighted specific cases where more detailed solutions are needed, which the Regulator has rightly noted in this interim response. These include the treatment of open schemes under the ‘Fast Track’ approach and concerns that a ‘Bespoke’ compliance route could be seen as a second-best option if not framed properly. We urge the Regulator to ensure that the economic lessons of the ongoing pandemic are learned and reflected in the new code. We therefore look forward to continuing our dialogue with TPR as part of the next consultation later this year in order that a robust, flexible and fit-for-purpose regime results."
Laura McLaren, Partner at Hymans Robertson: “Given the tone of TPR’s response, it seems unlikely the key principles underlying the new code are set to change fundamentally. However, there is some welcome reassurance that TPR will address the concerns raised by respondents.
“In particular, many trustees and sponsors will be comforted that both COVID-19 and post-Brexit recession risks will be factored into where the final Fast Track parameters are pinned down. Given the challenging developments since the consultation was published there has been a growing sense that these would need to be set more flexibly so Fast Track remains an achievable target for most schemes, at least in the short term.
“It is also encouraging that TPR will address calls for more detail on what will be acceptable under the Bespoke track and the supporting evidence needed. Our hope is that this will address widespread concerns around the potential overreach of the Fast Track regulatory approach, and TPR’s enforcement evolving in such a way that this might undermine the scheme specific nature of the Bespoke route. We see the flexibility offered by Bespoke as essential for many schemes.
“At this stage the interim response doesn’t offer much in terms of specifics. Those will come in the second consultation which TPR has confirmed it will not be launching until the second half of 2021. Although TPR indicates it will continue to communicate over that period, given the lengthy build up, some may have hoped for this sooner rather than later. Certainly, pension schemes which are due valuations this year will have the challenge of navigating this ongoing regulatory uncertainty. Any further delays to timings may run the risk of stifling decisive action from trustees and sponsors in the meantime.”
Raj Mody, global head of pensions at PwC, said: “The regulator’s interim response captures the mood of the industry well. While in principle a twin-track regime of fast track and bespoke sounds right, it will be crucially important to set the boundaries and flexibilities of fast track appropriately. It's in no-one's interests to have a situation where too many schemes have to go down the bespoke route. That would add an overhead to the industry which already has enough regulation on its plate. It would also add a workload to the regulator where its attention may be better directed at true problem areas and not pension schemes that are generally well-run and well-supported.
“While lots of attention has been focused on the impact of Covid-19 and other economic issues such as Brexit, all that really shows is that the market environment for pension schemes is not static. There will always be some kind of disruption. Any new regulatory funding regime will have to be able to withstand future turbulence; it's not just about the issues which have surfaced in 2020 and 2021.”
https://www.actuarialpost.co.uk/article/tpr-publishes-interim-response-on-db-funding-code-19173.htm
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