The Pensions Regulator issues statement on recovery plan flexibility

The Pensions Regulator has published a statement emphasising the importance of prudent funding levels for pension schemes, stating that where sponsors are in difficulty, flexibility is available in recovery plans.

Following a series of funding workshops, the regulator is setting out its approach to scheme funding valuations and the importance of the employer covenant through the economic downturn.

In its statement, Scheme funding and the employer covenant – prudence, affordability, applying flexibility through the economic cycle, the Pensions Regulator said the economic conditions had resulted in cash constraints for many employers in the short term, and greater uncertainty about longer-term prospects for some.

It went on to reassure employers that the current regulatory framework and approach to scheme funding is sufficiently flexible to cope with these conditions.

Chair of the Pensions Regulator, David Norgrove, said: “Where sufficient prudence has been built into funding targets, a sensible consideration about the length of the recovery plan and schedule of annual payments can occur.

“That is the balance we need to strike to best secure member benefits for the long-term and to enable employers to play their part in the economic recovery.”