Just 31 per cent of trustees are confident the Pensions Regulator will police funding agreements fairly and effectively in future, according to a survey by consultancy Willis Towers Watson.
The findings come as the regulator prepares to implement new powers as laid out in the government’s defined benefit white paper, which will accompany its new ‘clearer, quicker and tougher’ approach.
FTSE 350 companies are currently in their strongest position to support their DB schemes since the crisis, according to consultancy PwC, although many still have deficits and will have to agree funding plans under the regulator's watch.
Most trustees now feel that the regulator has moved more towards commercial awareness
David Weeks, AMNT
While the Willis Tower Watson research found trustees are not confident the regulator will be fair, they do expect members to benefit from its increased oversight.
Of those surveyed, 59 per cent said the extended powers will “help to produce better outcomes for DB members”.
The regulator is more aware of commercial reality
Only 15 per cent of trustees surveyed said the regulator’s new powers are “likely to make a big difference to future funding settlements” for their scheme, according to the consultancy.
David Weeks, co-chair of the Association of Member Nominated Trustees, detected a sense of “hope over expectation” from those pessimistic about the impact of a strengthened regulator.
“I think that the view of many trustees on the regulator and funding levels is that they look back to a time a few years ago when the regulator… didn’t take account of the sort of commercial realities [facing schemes],” he said, before adding that this had shifted recently.
In the survey, trustees ranked negotiations over funding agreements high on their list of issues that are set to face their schemes over the next three years. “Dealing with the Pensions Regulator” ranked near the bottom of their concerns.
Anthony Mason, a trustee on the Maersk RBS Pension Scheme, was encouraged by the assurances a emboldened regulator could provide to his scheme.
“The power to enforce contributions if needed, is an excellent power,” he said, also speaking in favour of “the power to ensure that companies engage with trustees and can’t walk away from their obligations”.
Schemes still need help securing contributions
Sixty-eight per cent of trustees said that it is a positive step for the regulator “to be able to define what is ‘prudent’ and ‘appropriate’”.
Sanjay Gupta, senior director at Willis Towers Watson, shared the view that more powers for the regulator will enhance outcomes for members.
“Having said that, the regulator has an array of existing powers, and it would be good to see the regulator exercising existing powers as well, which I think it plans to do,” he said.
Gupta emphasised the importance of the regulator’s powers in relation to helping trustees in funding negotiations, in terms of securing contributions from an unwilling scheme sponsor.
“If there was more direct support for trustees in those situations, that would certainly be helpful," he said.
A spokesperson for the regulator said: “We called on government for more effective tools and so we welcome the proposals in the white paper, which will enable us to be tougher where a scheme is not getting the funding it needs.”
The regulator cannot stop sponsors going bust
Last month, the regulator’s chief executive Lesley Titcomb surprised the industry with the announcement of her departure in February 2019, bringing an end to a tenure that began in 2015.
Speaking at the AMNT’s summer conference on Wednesday, Titcomb admitted that “in the past, the balance between the interests of members, and the interests of employers, may not always have been right”.
She reminded conference delegates that “TPR does not run businesses, and we cannot stop companies going bust”.
Titcomb reiterated the regulator’s pledge to have a more proactive oversight on riskier schemes, which was previously made in its written evidence to the work and pension committee’s DB white paper inquiry.
Regulator sees merit in criminal sanctions for DB sponsors
The Pensions Regulator is prepared to deploy tough new powers promised by the Department for Work and Pensions’ defined benefit white paper, although it admitted that there will be a high bar for beginning any criminal proceedings against sponsoring employers.
“The frequency and intensity of that contact, that oversight, will vary according to how risky we think a scheme is,” she said.
This will now take place between triennial valuations. The riskiest schemes are likely to receive contact from a representative of the regulator, “several times a year”, she said.
Mason supported this proposal. “Conceptually, it’s a good idea for a regulator to engage, rather than just leaping in at the last moment and being critical,” he said.
