UK – The successful application of smoothing is only possible if one applies "illogical" methods, Aon Hewitt has argued.
In the consultancy's response to the Department for Work & Pensions consultation, Aon Hewitt partner Kevin Westbroom echoed numerous other responses and said a "rigid" application of any funding approach would fail.
"Our experience has demonstrated that any rigid application of a funding methodology – Gilts-plus, inflation-plus, even the minimum funding requirement (MFR) – is bound to fail at some stage," he said.
Westbrook instead urged trustees, sponsors and the UK Pensions Regulator to exercise judgment when negotiating.
"While we know there is sufficient flexibility within the current system," he said, "it would be a good signal to all parties if the Pensions Regulator is required to give consideration to the longer-term health of sponsoring employers and the future sustainability of pension provision."
Jonathan Wicks, the consultancy's pension policy group chair, was more critical in his assessment of liability smoothing.
"Smoothing can only be made to 'work' – in the sense of delivering smaller disclosed deficits – if one adopts illogical approaches, such as smoothing liabilities only, or by smoothing over very long time-frames," he said.
Wicks noted that a longer time horizon for smoothing would raise questions about how to reflect changes within the pension fund, as well as cause problems in the investment risk area – echoing previous comments from fellow consultancy Redington.
Meanwhile, trustees for the Chamber of Shipping Retirement Benefits Plan have bought out the remaining 20% of scheme liabilities in a £9m (€10.3m) deal with Pension Insurance Corporation (PIC).
The pension insurer announced in January a £40m deal that saw it take on all of the fund's current pensioner risk.
PIC added that that the additional buy-in would allow the scheme to progress towards a complete buyout.
Discussing why the deal came so soon after the previous agreement, the Chamber's CFO Richard Barker said: "We were pleased and impressed with [PIC's] arrangements for the pensioners, and so they were a natural home to insure the rest of the plan once the trustee board and the employers were able to agree additional funding to move to buyout."
KPMG advised on the deal, and Robert Bass, director at the consultancy, noted that the additional buy-in was not envisaged a few months ago.
"The ability of all parties to move quickly, however, ensured the trustee was able to secure the favourable terms offered by PIC inside seven weeks," he said.
Chairman of the trustee board Alex Davies himself noted PIC's flexibility had allowed the fund to progress further faster than initially planned.
"This means the members' benefits for the entire scheme are now fully secured," he said.
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