Pensions - Articles - Regulatory framework is unfit for open DB schemes to thrive

 We also say we expect buy-in and buy-out capacity to be resilient to increasing volumes over the next decade and to see CDC schemes emerge as a new force.

 Steven Taylor, ACA Chair, commented: “ACA believes new scheme funding regulations need to be put in place very carefully to make sure current open schemes continue to thrive. Given sponsors’ historical experiences with DB schemes, closed schemes are unlikely to be reopened. Instead, we believe CDC schemes will be better placed to thrive in coming years provided regulations emerge as currently planned.

 “We expect to see an acceleration of DB schemes approaching insurance markets over the next decade. Given recent funding level trends, we are optimistic that insurance market financial and operational capacity to be resilient to these requirements.

 “In some cases, there is rationale for sponsors and trustees to agree to target continued build-up of future surpluses, that might for example be used to pay DC contributions. However, these cases are likely to be based on individual circumstances and we expect many sponsors will prefer to simply proceed to insurance buy-out as soon as this can be carried out efficiently. We do not believe it would be appropriate for legislation to be introduced which overrides the existing provisions in scheme rules around use of surplus.

 “On the quality of trustee boards, as trends continue to evolve in the direction of professionalisation, TPR can help to improve quality by monitoring the range of activities provided by professional trustees and ensuring appropriate oversight. We also believe there continues to be a role for lay trustees to ensure diversity of thinking and that member perspectives are fully considered in decision making.”

 ACA response to WPSC Call For Evidence: Defined Benefit pensions schemes