NEWS   |    October 27, 2020

Partner Rosalind Connor comments in Pensions Expert on larger DB schemes facing £100bn bill due to new regulations in the pensions scheme bill

The impact of new regulations in the pension schemes bill and the future defined benefit funding code will mean that sponsors of the UK’s largest schemes will have to fork out £100bn over the next 10 years, according to new analysis from LCP.

At the centre of this analysis is the impact of the pension schemes bill, which strengthens the Pensions Regulator’s powers and the existing sanctions regime, including the introduction of criminal offences.

The watchdog is working on a new DB funding code, with a consultation launched in March proposing a twin-track DB funding approach that aims to reduce average scheme dependency on sponsoring employers.

Rosalind Connor, agreed and noted that these two forces will put a very much upwards pressure on pension funding.

She further commented:

The new DB funding code “definitely focuses, among other things, on schemes that have already become fully funded on the present basis also funding for their separate long-term objective, which will push many towards a higher funding amount”.

“TPR’s new powers under the bill have been broadly drafted, so that they can be threatened for all sorts of activities”.

“It is certainly possible for the regulator to threaten them to ask for increased funding into schemes, or alternatively the very fact of their existence will make complying with regulator demands much more attractive for businesses.”

“Even though the new rules might simply mean pension schemes get better funded, the question remains about how these powers will be used, and whether the focus will be on the right schemes and on employers who can afford an increase without seriously damaging their business in these very uncertain times”.

Read Rosalind’s comments in Pensions Expert.

The views in this article are intended for general information purposes only and should not be used as a substitute for professional advice. Arc Pensions Law and the author(s) are not responsible for any direct or indirect result arising from any reliance placed on content, including any loss, and exclude liability to the full extent. Always seek appropriate legal advice from a suitably qualified lawyer before taking, or avoiding taking, any action. If you have any questions on the points raised in the above, please do not hesitate to get in touch.

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