The regulator ran a consultation exercise on a revised code of practice for DB scheme funding, a new DB regulatory strategy and a revised DB funding policy.
Prospect has pointed out that the draft code does not fully reflect the statutory objective that calls for the pensions regulator “to minimise any adverse impact on the sustainable growth of an employer”.
Instead the revised code simply requires that “decisions do not unreasonably impact on the employer’s sustainable growth plans”.
Prospect pensions officer Neil Walsh said: “The code of practice appears to be balancing the different statutory objectives in a way not intended by Parliament. Implicitly the wording appears to favour other objectives, such as reducing risks to the Pension Protection Fund, over the new statutory objective on sustainable growth.”
The union believes that the code should be revised to reflect the more equal balance between the objectives implicit in the legislation.
In its submission to the regulator, Prospect said the current regulatory environment for DB pension schemes is significantly better than the regime that preceded it. But it did highlight areas where regulation can be improved.
Encouraging collaboration
Prospect particularly supports the emphasis in the draft funding policy on collaboration between trustees and employers.
“While the pensions regulator has successfully overseen a significant and welcome reduction in the incidences of conflicts of interest in scheme governance, it may now be time to recognise the value of greater sharing of information and expertise between the directors and senior executives of scheme sponsors and trustee boards,” Walsh said.
Scheme size relevant
By focusing on larger schemes, Prospect believes that the pensions regulator is indirectly putting the objective of reducing risks to the Pension Protection Fund ahead of its other objectives.
Walsh said: “The main concern for the regulator in respect of larger schemes can surely only be the relatively larger potential risk they pose to the PPF. The regulator should not be over-regulating large schemes sponsored by creditworthy companies.
“Most of these schemes are run efficiently and have a good track record of protecting members’ benefits. The regulator should focus on schemes that are more likely to be badly run or endanger members’ benefits.”
The regulator’s own research has shown that administration issues are more of a problem for smaller schemes and past data shows that members’ benefits are more at risk in relatively smaller schemes.