In the Chancellor’s Autumn Statement, he announced that the Government intended to consult on two potential policy changes:
- whether to allow companies undergoing valuations from 2013 to smooth asset and liability values; and
- whether to provide the Pensions Regulator with a new statutory objective to consider the long-term affordability of deficit recovery plans to sponsoring employers.
In the Budget today, the Chancellor confirmed that Government has decided not to go ahead with the first of these proposals as the response to the call for evidence did not reveal a strong case for it.
However, the Pensions Regulator will be given a new objective “to support scheme funding arrangements that are compatible with sustainable growth for the sponsoring employer and fully consistent with the 2004 funding legislation”. The precise wording of this objective will be set out in legislation due to be published in Spring 2013. Implementation of the new objective will be subject to review after 6 months. In addition, the Regulator has announced that it will revise its Code of Practice on funding as soon as possible in 2013 to reflect its new objective.
It is somewhat surprising that the Government has decided to go ahead with this new objective as the responses from the pensions industry did not generally appear to be favourable.
The new objective potentially competes with the Regulator’s existing statutory objectives to “protect the benefits under occupational pension schemes” and “reduce the risk of situations arising which may lead to compensation being payable from the Pension Protection Fund”. It will be interesting to see how the Regulator manages to juggle these objectives in practice.
The Budget document can be found here.