NEWS   |    September 21, 2020

Partner Rosalind Connor comments in Professional Pensions and in The Legal Diary on Railways Pension Scheme’s deficit warning over revised TPR funding codes

The Railways Pension Scheme has warned The Pensions Regulator (TPR) that its proposals to revise the defined benefit (DB) funding code could lead to a £15bn deficit in the scheme as it is forced to switch lower-risk but lower-returning assets, the Financial Times says.

The article in today’s Financial Times also reported that the £30bn fund said the changes would be likely to have a “substantial” cash impact on dozens of employers in the sector.

Rosalind Connor commented:

“Introducing such wide-ranging changes is a particular challenge at a time of significant economic flux. In its introduction to this year’s consultation document, TPR says it is ‘seeking to create a sustainable framework, which provides the right balance between the security of member benefits and the costs to employers of running their DB schemes’.

“It may be argued that the twin track approach would reduce the costs of running such schemes. However, any such savings must be offset against the costs to schemes of adjusting to a new system of regulation.”

“In terms of ensuring the effectiveness and cost efficiency of the regulatory regime, following a well-trodden path must surely be the best course of action. Continuing to use an effective and widely understood system allows trustees to focus time and money on new challenges, such as GMP equalisation, or on long neglected areas, such as data and benefit audits.

“It also gives trustees more time to focus on taking prudent steps to protect schemes from the ravages of the economic fallout from the ongoing coronavirus pandemic.”

Read Rosalind’s comments in Professional Pensions. Rosalind also commented in The Legal Diary.

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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