While press reports hinting at a more flexible approach led to rises in share prices at companies with large deficits last Friday, several experts have failed to see an explicit change in message in the regulator’s new corporate plan.
Darren Redmayne, managing director at Lincoln International, said: “The regulator’s comments in its corporate plan regarding scheme-specific funding are consistent with our experience of its existing approach.”
On page six of its plan the regulator states: “Recent economic conditions will have an impact on schemes moving forward and we would expect to see this reflected in both funding and recovery plan lengths.”
This echoes a statement it made to trustees in October, which noted that current conditions “may result in longer recovery periods being proposed”.
In February, the regulator qualified this by telling employers that longer recovery plans “might be appropriate” where deficits are “much larger”.
Consultants report that schemes are moving to 15-year recovery plans with tacit approval of the regulator, but the regulator does not want to be seen to publicly endorse a specified timeframe.
Some have even seen a few 40-year recovery periods in place.
John Ball, head of defined benefit pension consulting at Watson Wyatt, said of the regulator’s predicament: “The regulator doesn’t want to be blamed if trustees demand more than employers can afford, and doesn’t want to be blamed if trustees get too little money from employers who subsequently go bust.”
Duncan Howarth, president of the Society of Pension Consultants, said: “Inevitably, we will have to move away from 10-year recovery plans – I think 15 years will become more the norm.”
