Pensions Regulator issues statement to UK employers

The Pensions Regulator has issued a statement to employers who sponsor final salary pension schemes regarding the impact of current economic conditions. This follows a similar statement issued to pension scheme trustees last autumn.

The statement highlights that:

The Regulator recognises that current economic conditions are of real concern to employers;
Employers need to be reassured that the current scheme funding regime is flexible enough to cope with the economic downturn;

Where a sponsor company is under pressure there is potential to renegotiate previously agreed plans to repair pension deficits;

Trustees should be in a position to understand what is reasonably affordable for their sponsor, but all unsecured creditors must be treated equitably and the pension scheme not disadvantaged;

The Regulator will continue to apply the flexibilities in the scheme funding system pragmatically, looking for outcomes in the best interests of the scheme and sponsor.

Commenting on the statement, David Norgrove, Chairman of the Pensions Regulator said: "Trustees of pension schemes in deficit are unsecured creditors of their sponsoring employer. We are sensitive to the pressures many of these employers face in current economic conditions with falling asset prices and increasing deficits. There is no reason why a pension scheme deficit should push an otherwise viable employer into insolvency. But the pension scheme recovery plan should not suffer, for example, in order to enable companies to continue paying dividends to shareholders.

Any employer who believes that an existing recovery plan is at serious risk of jeopardising the company's future health or solvency should discuss this with their pension scheme trustees, and we would encourage schemes and sponsors to talk to us if they have concerns."