Pensions update – Higher contributions cause pressure

Employers could be liable for higher pensions contributions under the terms of September’s scheme specific funding requirement (SSFR).

The SSFR, which will only apply to defined benefit schemes at their next three-yearly actuarial valuation, will replace the previous minimum funding requirement where schemes will have to set out a recovery period by the end of which its deficit is expected to be cleared.

Nicholas Greenacre, senior associate at law firm White & Case, said: “What is fairly certain is, as a result of the SSFR, employers are likely to be paying higher contribution rates. You may well find employers close their plans to future accrual to try to minimise risk.”

Employers and a scheme’s trustees will need to agree contribution levels based on an actuary’s advice. If they cannot agree, however, the pensions regulator could intervene. Greenacre added that this may not always be in an organisation’s best interests.