Pension funds comment on Regulator's funding analysis

10 October 2012

The National Association of Pension Funds (NAPF) commented on evidence published today by The Pensions Regulator of how flexibilities in the defined benefit (DB) funding regime have been used by pension schemes and sponsoring employers.

Mel Duffield, Head of Research, NAPF, said: “This clearly shows the intense pressure that pension funds are under at the moment. Record low gilt yields, driven down by quantitative easing and the UK’s reputation as a ‘safe haven’ for investors, are pushing up fund liabilities and leaving employers with big deficits to fill as a result.“

“The Regulator’s analysis suggests that three-quarters of DB schemes are likely to need to extend the length of their ‘recovery plans’ by at least another three years, as well as increasing their contributions into their scheme to plug the deficit. Nearly half of all DB schemes are also likely to need to make use of other flexibilities so that their contributions are manageable. That so many schemes are having to explore these flexibilities shows that these are exceptional times. The flexibility of the system is greatly valued by pension funds, but we do not think it is enough. There needs to be a wider rethink about how deficits are valued in relation to gilts.”

Press release

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