The Pensions Regulator

Substantial progress made towards implementing truly risk based regime

Ref: PN05-27
21 September 2005

Substantial progress has been made towards implementing a truly risk based regulatory regime, Pensions Regulator chairman David Norgrove said yesterday.

Speaking at the Society of Pension Consultants conference in London, he outlined how trustees should act to meet the new funding requirements.

"The new scheme funding regime will require trustees to decide on a funding strategy for their scheme to make provision to pay benefits when they fall due. It will be down to the trustees, after taking advice from their actuary, to agree with the employer how they will achieve this.

"A scheme's funding target must be set based on prudent choices of assumptions and where a valuation reveals that the target is not met, an agreed recovery plan must be adopted to eliminate the shortfall appropriate to the scheme's and the employer's circumstances."

David Norgrove also gave an overview of the Pensions Regulator's work on scheme funding so far, and said the new regime was working.

"The regulator has made substantial progress towards implementing a truly risk based regulatory regime. In particular, the cases we have dealt with regarding the management of the risk associated with corporate transactions have shown that the legislation is working successfully as intended."

The Pensions Regulator is expected to publish important scheme funding documents next month. This will include the code of practice on 'Funding Defined Benefits' in the form laid before Parliament; specimen funding documents to assist trustees and their advisers; and a consultation document containing a draft statement from the regulator, describing how it will operate in relation to the new requirements and how it will use its powers.

Editor's notes

1. The code of practice, specimen funding documents and consultation document will available on a dedicated page on the Pensions Regulator's website in October at www.thepensionsregulator.gov.uk Publication will be announced by press release and using the regulator's 'news by email' service. To sign up to news by email visit www.thepensionsregulator.gov.uk/onlineServices
2. The Pensions Regulator has been established as the new regulator of work-based pensions in the UK, with wider and more flexible powers under the Pensions Act 2004. It has replaced Opra which no longer exists.
3. The new powers of the Pensions Regulator include the ability to:
4. • collect more detailed scheme information;
   • impose a statutory obligation on 'whistleblowers' to report suspected breaches of the legislation to the regulator;
   • issue improvement notices and third party notices, enabling the regulator to ensure problems are put right;
   • freeze a scheme that is at risk, while the regulator investigates; and
   • prohibit trustees who are judged not fit and proper to carry out their duties.