The majority (80%) of respondents said The Pensions Regulator (TPR) should provide more flexibility in the current rules to reduce the impact of quantitative easing (QE) for pension schemes, according to research by global fiduciary management provider SEI.
The research, which polled trustees, finance directors and pension fund executives from 51 different pension funds, found that, among this 80%, half felt that pension scheme liabilities should be based on an average of the last three years’ bond yields, 38% felt that the period for meeting funding objectives should be extended, and 12% felt that the pension protection levy should be decreased.
In April, TPR announced that it would provide flexibility in recovery plans where sponsors were struggling to pay, but ruled out any more far-reaching allowances around assumptions or other rules.
In July, the Bank of England Monetary Policy Committee decided to extend QE by a further £50 billion of bond purchases.
Charles Marandu, director, European Institutional Advice in SEI’s institutional group, said: “The results demonstrate that pension scheme trustees remain concerned that QE is distorting market interest rates and pushing up scheme deficits.
“The Pensions Regulator’s statement that flexibility exists within recovery plans seems to have given trustees little comfort, as there was no relief for headline scheme deficits.
“Most trustees polled favoured smoothing the volatility in funding positions by using an average of historical interest rates to determine the funding liabilities, but, as yet, these measures have been resisted by the authorities.
“One possible relief measure could be to allow a degree of extra flexibility in the setting of discount rates, which explicitly adjusts for QE without necessarily requiring the scheme investment policy to be re-risked in order to support it.”
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