The Pensions Regulator has announced plans to put into place specific funding targets for companies with final salary schemes, which means UK firms may have to pay up to £130 billion extra into the schemes over the next decade.
The regulator recently published a paper on how it plans to regulate new funding requirements for defined benefits schemes. It outlines a system in which firms will need to agree a schedule for repaying the final salary pension fund deficit with trustees, and submit a repayment schedule to the regulator within 15 months.
The new proposals will allow the watchdog to force firms to speed up repayments, adjust promises to employees, or order a scheme be wound up.
Our view
This could cripple many schemes. More and more pension funds are closing down and some employers are even going under because of strict requirements to pay huge sums into company pension funds.
Add to this the burden of having to now pay for a pension compensation funds, we believe company pension funds will become, if they are not already, too expensive to run i.e. we expect more to close.
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