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TPR cautions on pension buyouts

UK - The Pensions Regulator (TPR) has warned although pension buyouts are an acceptable way for companies to transfer pension liabilities, employers should not consider it a way to abandon their schemes.

Speaking at today's e-share governance seminar in Reading John Ashcroft, head of defined contribution, governance and Europe at TPR, said: "Trying to transfer [pension] liabilities in a way that does not provide security is very dangerous and we have taken a strong line on this."

He added trustees should look very carefully at propositions that might enable the employer to dodge responsibility.

That said, Ashcroft recognises the pensions arena is changing and the buyout market is seen as a serious alternative to running a scheme within a company.

"It is an acceptable way of managing risk," said Ashcroft.

"What we welcome is effective risk management by trustees and by schemes working with employers, and we recognise that employers are now much more aware of the risks inherent to defined benefit schemes and not just investment or longevity risks."

He added the TPR was "less keen" to see employers using financial mechanisms to avoid their responsibilities and concluded: "Transferring liabilities to another place where we know there are security mechanisms in place - that is an acceptable way forward."

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