The Pensions Regulator

Statement issued to trustees on current market conditions

Ref: PN08-26
24 October 2008

The Pensions Regulator today confirmed that it is issuing a statement to trustees of all work-based pension schemes setting out its general position in relation to current market conditions.

The statement highlights that:

• recent developments in the financial markets will be of great concern to pension scheme trustees, sponsoring employers and scheme members;
• trustees need to remain vigilant and to keep the position of their schemes under review;
• the regulator's current codes and guidance cover the relevant issues and allow sufficient flexibility for trustees;
• trustees should continue to focus on making sound decisions in the long term interests of scheme members.

The regulator's contacts with larger DB pension schemes suggest a relatively limited direct exposure to so called toxic assets and limited involvement in derivative trades with counterparties that are in difficulty. While a few individual pension schemes may have increased levels of exposure, the regulator has not been informed of any significant problems and does not believe the issue is systemic.

Commenting on the statement, David Norgrove, chairman of the Pensions Regulator, said: “The main issues faced by pension schemes in the current economic climate seem likely to be the more general fall in asset values and emerging pressures on employer covenants.

“For DB schemes, both aspects come together within the existing scheme funding framework. We believe that this framework is flexible enough to deal with current conditions, recognising that pension schemes are long-term undertakings. For DC schemes, the issues are different, but again we believe our existing guidance will help trustees, employers and members.

“Trustees should continue to focus on making sound decisions in the long-term interests of scheme members.”

Editor's notes

1. A copy of the statement is available on the regulator's website.

2. Copies of the statement are being issued to schemes over the next few days.

3. The Pensions Regulator is the regulator of work-based pension schemes in the UK, with objectives to protect members' benefits, promote good administration and reduce the risk of calls on the Pension Protection Fund. Our approach is risk-based focusing on education and enablement, with enforcement where appropriate.

We have the ability to:

• collect information about pension schemes; through scheme returns, under the scheme funding regime and as well as statutory (including whistleblowing) reports;
• issue notices requiring actions to tackle non-compliance, prohibit trustees who are judged not fit and proper to carry out their duties or appoint independent trustees;
• direct pension schemes as to how to calculate their liabilities and the contributions required;
• issue a contribution notice where there is an attempt to avoid liabilities, or a financial support direction where the employer is a service company or insufficiently resourced.