UK Budget introduces new objective for Pensions Regulator
UK – The UK's pensions regulator will soon be forced to consider whether recovery plans create a sustainable growth environment for defined benefit (DB) plan sponsors, after chancellor George Osborne confirmed it would be given a new statutory objective.
Speaking in the House of Commons during the 2013 Budget, Osborne said the Pensions Regulator (TPR) would be given "a new requirement to have a regard for the growth prospects of companies", while rejecting the introduction of the smoothing of pension liabilities.
Pensions minister Steve Webb commented that the best way to ensure DB schemes could keep their promises was to guarantee sponsors prospered.
"This new objective for the Pensions Regulator will help ensure trustees and employers have the flexibility to come up with plans that deal with pension scheme deficits and benefit both scheme members and firms," he said.
The Department for Work & Pensions (DWP) will publish the wording of the new objective by the end of the spring, and its implementation will be reviewed six months after implementation, the Treasury said.
"The government is also consulting on a new growth duty for non-economic regulators and is attracted, subject to the results of that consultation, to applying such a new duty to TPR," it added.
Michael O'Higgins, chairman of TPR, issued a terse statement in response to the announcement.
"We regulate according to the legislative framework set by government and parliament," he said.
He added that, in light of the government's proposal, it would "make the changes required", but continue to build its engagement around the existing 2004 funding regime.
"In addition," O'Higgins said, "we will shortly publish an annual funding statement, which will set out our guidance to trustees in the context of current economic circumstances, including the flexibilities available to trustees and company sponsors in the current regime, particularly the freedom to choose the basis on which contribution levels and valuations are calculated."
The regulator's chief executive Bill Galvin previously appeared to reject any calls for a further objective, noting that while it was a matter for government to decide, the existing funding framework required the regulator and trustees "to balance the interests of business, the pension scheme and the [Pension Protection Fund]."
The introduction of a further statutory objective for the regulator had received support from the National Association of Pension Funds (NAPF), as well as business lobby CBI, and was put out to consultation by the DWP in January.
However, other parts of the pension industry, such as the Society of Pension Consultants, argued that TPR needed increased resources, rather than an additional mandate.
Osborne's budget also confirmed that the smoothing of liabilities – put out to consultation at the same time as the new statutory objective – would not be allowed.
"The DWP's call for evidence on asset and liability smoothing did not reveal a strong case for changing legislation to permit smoothing," the Treasury said, adding that it would "therefore not be pursuing this measure".
The chancellor also announced the abolition of stamp duty for "shares traded on growth markets" such as the AIM, the alternative investment market of the London Stock Exchange.
He contrasted this with moves by several European Union members to introduce a Tobin tax.
"In parts of Europe, they're introducing a financial transaction tax," he said. "Here in Britain, we're getting rid of one."