A majority of pension sector professionals are calling on The Pensions Regulator to adopt a more pragmatic approach to pensions regulation, as the impact of Covid-19 is felt by defined benefit schemes and sponsors.
A snap poll conducted by Herbert Smith Freehills revealed that two-thirds (67%) believe that The Pensions Regulator should adjust its ‘tougher’ approach and focus more on the sustainable growth of scheme sponsors. Their hope is to see the Regulator’s emphasis shift as it did in the wake of the 2008/09 financial crisis. Additionally, just one in five respondents (21%) argued that the Regulator’s existing ‘clearer, quicker, tougher’ approach adopted in the light of more recent high-profile corporate failures should be maintained in current climate.
The poll was conducted during a webinar exploring the potential impact of The Pension Schemes Bill and recent changes to the UK insolvency regime. It explored what changes senior pension professionals believe the Regulator should make to its proposed approach to the new Defined Benefit Funding Code. Key findings included:
- almost three-quarters (73%) urged the Regulator to introduce short-term easements into the parameters for the proposed fast-rack regime for the next valuation cycle
- more than half (53%) suggested that the Regulator should break the link between the fast-track and bespoke approval regimes, so that schemes which choose the bespoke route are not judged by reference to the Regulator’s fast-track parameters
- one third (32%) also called for the Regulator to increase the prescribed length for recovery plans via the fast-track route.
Samantha Brown, partner and head of Herbert Smith Freehills’ UK pensions practice, said: “The Regulator’s tougher approach to pensions regulation and the policies leading to the introduction of the new criminal offences and regulatory powers were developed in much more benign economic times. The world has now changed and it seems inevitable that the Pensions Regulator will need to modify its approach to support the economic recovery and to promote the sustainable growth of sponsors on which DB schemes depend.”
She continues “The Regulator launched the consultation on its new funding Code just before we entered the first national lockdown in March. Although many of the principles may still hold true, the Regulator needs to consider carefully how they are applied and how much strain its new approach may place on sponsors whose businesses are reeling from the impact of Covid-19.”
Also speaking at the webinar were Steve Webb, former Minister of State for Pensions and a partner at Lane Clark Peacock, and John Whiteoak, partner and head of Herbert Smith Freehills’ restructuring, turnaround and insolvency practice. The panellists discussed whether the new criminal offences and regulatory powers will inhibit legitimate corporate activity. This question was posed to attendees, a majority of whom (77%) considered that the powers would have this effect.
Steve Webb commented: ‘It is vital that the new funding regime can handle the diversity of the occupational pension landscape. If too many schemes are forced into an overly-prudent funding template this could be bad news for members, sponsors and the economy as a whole’.
The webinar is now available to view on demand. Click here to access the content.