Almost all (96 per cent) pension scheme sponsoring employers want a ‘genuinely flexible’ bespoke option included in The Pensions Regulator’s (TPR) second defined benefit (DB) Funding Code consultation, according to the Association of Consulting Actuaries (ACA).

The ACA’s 2021 Pension trends survey quizzed employers as to what they want contained within the new consultation, which is expected in the next few months.

It found that 72 per cent did not want to benchmark a bespoke option against fast track, while 78 per cent felt that covenant should continue to be recognised in funding requirements, even for ‘significantly’ mature schemes.

Nearly nine in 10 (89 per cent) stated that it must remain clear that trustees have absolute discretion over investment decisions.

In regard to how contributions and investments returns interact, 91 per cent wanted to be able to allow for anticipated additional returns in recovery plans, while 69 per cent felt that contributions should not be required to bridge the gap between technical provisions and long-term funding targets where additional returns are expected.

More than half (54 per cent) said it should be possible to allow for anticipated returns when determining future service contributions, although 26 per cent were undecided.

“The ACA’s survey underscores several messages that have already been fed back through TPR’s earlier consultation,” commented ACA chair, Patrick Bloomfield.

“What may come as a surprise is how unified and strong industry opinion is: ‘bespoke’ must mean bespoke. ‘Fast track’ journeys must not raid employers for cash that is already expected to come from investment returns.

“Presuming employer support ceases to exist once a scheme is mature wouldn’t be realistic. I’m confident TPR has heard these messages, but it’s a timely reminder as we head towards the next consultation and TPR’s parameters for fast track.”

Bloomfield added that the industry finds itself “between a rock and hard place” on getting the new DB funding regulations finished following the “understandable” delays caused by Brexit and Covod-19.

“TPR is clear that we’re to operate under the current regulations in the meantime, but the reality is an awkward limbo, with an eye to what is coming down the track,” he continued.

“Having waited this long, the ACA urges TPR to continue listening to industry feedback.”

Also commenting on the findings, ACA Pension Schemes Committee chair, Peter Williams, said: “It is clear that there is very strong support for maintaining genuine flexibility in the new funding regime, and the consensus is against using fast track as a mandatory benchmark.

“One of the more detailed findings is the similarly strong support for maintaining the ability to use anticipated additional returns as part of a scheme’s recovery plan, which may be in some doubt – the consultation on the new Code of Practice on scheme funding will set out TPR’s proposals.

“Respondents were also clear that trustees should maintain absolute discretion over investment decisions – hopefully the anticipated regulations on the funding and investment strategy provisions of the Pension Schemes Act will help to clarify that this will continue to be the case.”

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