Employers reluctant to top up fund
UK - Pension scheme sponsors will increasingly avoid putting money into their pension fund, participants were told at a London-based pension scheme funding panel discussion.
Discussing the question whether or not pension schemes will have surpluses in the future, Fraser Sparks, a solicitors at Hammonds, argued, at the meeting earlier this week, employers are afraid they will be unable to free up the money that has been put in.
According to Sparks, scheme sponsors are already considering ways of avoiding having to inject further large sums of money into their schemes which might create a surplus: "It might never get to that stage of a surplus," he said.
Partha Dasgupta, chief executive of the Pension Protection Fund, argued pension funds will increasingly look towards implementing de-risking measures for their schemes, including the buyout option.
Dasgupta said: "The days of augmenting your benefits are probably gone," adding pension funds will increasingly look, for instance, at using contingent assets, escrow accounts, implementing less volatile investment strategies or looking at pension fund buyouts.
Stuart Southall, principal at Punter Southall, agreed with Dasgupta, by adding as funding levels improve, pension fund sponsors and trustees will seek to de-risk their pension arrangements.
Moreover, he said: "At some point, all sponsors of defined benefit (DB) pension funds must be looking to offload their liability. This can only be done by a full buyout."
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