DB Funding Statement 2020: NRF survey gives the Pensions Regulator a thumbs-up
Sophy Lelliott, a trainee in our pensions team writes: the UK Pensions Regulator published its annual funding statement later than usual on 30 April 2020. The Statement is aimed at trustees and sponsoring employers of defined benefit (DB) schemes with valuation dates between September 22, 2019, and September 21, 2020. Our previous blog examining its key elements can be viewed here.
On 28 May 2020 Lesley Browning, Phil Jelley and Sabrina English from our London pensions team hosted an interactive webinar discussion focusing on the Statement and what it might mean for your scheme.
During the webinar, attendees were asked the survey questions below on how well the Statement has been received and the result was a general thumbs-up for the Regulator’s approach. Overall, webinar attendees felt the Regulator has struck a good balance in setting clear expectations while providing flexibilities to trustees and keeping in mind employer interests, particularly within today’s tough business climate.
Has the Regulator done a good job with the 2020 DB Funding Statement?
Asked whether they thought the Regulator had done a good job in setting out its expectations in a fair and balanced way, 85.2% said that they thought that it had. Most attendees (78.6%) also felt the Regulator had struck the right balance in its consideration of employers’ interests in the face of the current pandemic.
A substantial majority (82.1%) also agreed that the Regulator’s Statement provides sufficient flexibilities for trustees, enabling them to balance the impacts of the pandemic on the scheme employer against their duties to their scheme.
Our survey results suggest that most trustees and DB sponsoring employers have reacted positively to the Regulator’s 2020 funding approach and its acknowledgement of the uncertainties in the current landscape. The flexibilities offered in the Statement, for what the Regulator views as necessary trustee-employer collaboration, should help schemes to manage the impacts of the pandemic and maintain a focus on the long term funding target of the scheme.
Deferring deficit repair contributions
The audience was also asked whether their scheme had received an employer request to defer deficit repair contributions, which exactly 50% had. Interestingly, our snapshot suggests that a higher number of schemes have received deferral requests than has previously been reported by the Regulator and in other surveys of trustees and sponsoring employers.
The DB Funding Code
The Regulator remains committed to pressing ahead with a revision of the DB Funding Code with the consultation now extended until 2nd September 2020. Although the proposed changes to the Code were originally conceived in a more benign economic environment, and the persistence with the consultation has been criticised in some quarters, some 71.4% of our survey responses agreed with the Regulator’s approach and felt that the proposals to review the Code should not be shelved.
Conclusion
Our survey responses suggest that many trustees and sponsoring employers believe that the Regulator’s Statement acknowledges the challenging times brought about by the Covid-19 pandemic and the tough times for employers in the immediate future. The audience also largely believed that the Regulator struck a satisfactory balance between clear expectations and providing flexibilities to trustees. This green light from our listeners will no doubt be welcome news for the Regulator!
