Regulator Blamed for Final Salary Pensions Becoming a Thing of the Past Within 10 Years

Photo via Auto Enrolment Somerset

Today, leading experts warned that the remaining final salary pension schemes of Britain would be extinguished within ten years.

Heightened costs and regulators taking a tougher line are to be blamed for putting pressure on pension corporates and trustees, meaning that they have no choice but to close retirement pots to future accrual.

The head of corporate consulting at actuarial firm Hymans Robertson, Jon Hatchett, said that the high profile corporate woes of Tata Steel and BHS have led to the Pensions Regulator (TPR) taking a “tougher line”.

He stated: “The upshot is companies will be under greater pressure from trustees, with the backing of the regulator, to pay more cash towards deficits.”

Hymans Robertson said that just over half or 55 percent of FTSE 350 firms have already closed their defined benefit schemes. The firm said that by 2027, the remaining funds that are open to accrual are possible to be shut off altogether.

Hatchett stated: “The regulator’s messaging is bang on for situations where affordability is stretched, and covenant risk is high. In these circumstances getting the cash in while you can make sense. But only five percent of schemes are in this position.

“The only companies that will be clear of the requirement for more cash are those that have hedged most of their inflation or yield risk, and that are therefore still on track or those where affordability is genuinely stretched.”

The TPR agreed that it was getting harder. However, this was a part of changes that also included being quicker and clearer “to protect workplace pensions.”

A watchdog spokesperson stated: “We will intervene where we believe occupational defined benefit schemes are not being treated fairly by employers.”