Docklands Light Railway Pension Scheme report published
Thursday 3 September 2015
The Pensions Regulator today published details of its funding investigation into the Docklands Light Railway Pension Scheme (the 'Scheme').
The report highlights how the regulator will take action to protect member savings where defined benefit (DB) schemes have missed statutory deadlines to provide valuations.
The trustees of the Scheme and its employer, Serco Limited, were unable to reach agreement on the actuarial valuation with an effective date of 1 April 2009.
Initially, the regulator facilitated discussions between the trustees and Serco Limited to explore whether they could agree.
But as the negotiations were unsuccessful, the regulator reached the view that it was appropriate to consider exercising its funding powers. The regulator suspended its regulatory action due to further negotiations between the parties. These negotiations led to the trustees and Serco Limited (as well as Docklands Light Railway Limited) reaching a settlement.
Under this settlement, the Scheme’s funding deficit shown in the 1 April 2012 actuarial valuation (£36.1 million) will be cleared by January 2018, with over £20 million payable by January 2016. In total, there was an agreement to pay £37 million to the Scheme with £33 million coming from Serco Limited and £4 million from Docklands Light Railway Limited, the principal employer under the Scheme documentation.
A section 89 report has now been published setting out the action taken by the regulator in the case. You can find the report in section 89 reports.
Lesley Titcomb, chief executive at The Pensions Regulator, said:
“Our action in this case demonstrates we will work closely with schemes to address non-compliance but also that we have a low tolerance for late actuarial valuations.
“As late actuarial valuations can create uncertainty and could increase risks to both the scheme and the employer, we will consider whether to use our powers to protect member outcomes and ensure employers meet their obligations.”
- This is the first time a section 89 report has been issued relating to a scheme funding case.
- The trustees of the Scheme sought to prepare the 2009 valuation but were unable to reach agreement with Serco Limited in respect of the funding requirements prior to the statutory deadline of 30 June 2010.
- Whilst the parties provisionally agreed most of the 2009 valuation assumptions, and agreed that the Scheme was in deficit, they were unable to reach agreement in respect of a recovery plan to clear the deficit and a schedule of contributions.
- In August 2012, the regulator issued a warning notice with a view to exercising its funding powers under s231 of the Pensions Act 2004.
- In late 2013, the trustees made a demand for contributions under the Scheme contribution rule and then brought court proceedings seeking payment of the contributions demanded.
- The regulator’s regulatory action remained suspended pending the outcome of those proceedings. The proceedings were settled in November 2014 and the trustees were then able to submit compliant 2009 and 2012 valuations.
- More information on the regulator’s current approach to the regulation of funding for DB schemes can be found in 'DB funding regulatory and enforcement policy' (2014) in our strategy and policy section.
- The Pensions Regulator is the regulator of work-based pension schemes in the UK. We have objectives to: protect members’ benefits; reduce the risk of calls on the Pension Protection Fund (PPF); to promote, and to improve understanding of the good administration of work-based pension schemes; to maximise employer compliance with automatic enrolment duties; and to minimise any adverse impact on the employer’s plans for sustainable growth (in relation to the exercise of the regulator’s functions under Part 3 of the Pensions Act 2004 only).
Tim Marks 01273 662092