Pensions Regulator urges pension trustees to make ‘sound decisions’

The Pensions Regulator has urged trustees to continue to focus on making ‘sound decisions’ in the long-term interest of pension scheme members during a time of uncertain market conditions.

In a statement issued to trustees of all work-based pension schemes, the regulator asked trustees to remain vigilant and keep the position of their schemes under review.

But while acknowledging the economic situation will also be of great concern for employers and scheme members he said contacts suggest direct exposure to ‘toxic assets’ is limited and there is relatively limited involvement in derivative trades with counterparties that are in difficulty.

David Norgrove, chairman of the Pensions Regulator, said: “The main issues faced by pension schemes in the current economic climate seem likely to be the more general fall in asset values and emerging pressures on employer covenants. For DB schemes, both aspects come together within the existing scheme funding framework. We believe that this framework is flexible enough to deal with the current conditions, recognising that pension schemes are long-term undertakings. For DC schemes, the issues are different, but again we belive our existing guidance will help trustees, employers and members.”

The statement also directs trustees to relevant aspects of the regulator’s guidance and codes of practice. Trustees managing defined benefit (DB) schemes have been advised to follow existing best practice, which highlights the importance of monitoring investment portfolios on a regular basis. Trustees concerned about the impact of falling asset values and weakening covenants should refer to principles outlined in the Code of practice: funding defined benefits.

Trustees in trust-based defined contribution (DC) schemes should refer to current guidance on how on member communication whereas employees in contract based schemes should have been advised to contact their provider and visit the Financial Service Authority’s (FSA) website Further information is provided by The Pensions Advisory Service.

Wayne Phelan, managing director, PS Independent Trustees Limited welcomed the guidance, saying:”Conventional wisdom “is broken” and we see now as the time for the regulator to help trustees understand and adapt to their duties. Now is the time to support trustees and enable them to make the right (and sometimes very bold) decisions.”