Editorial: Towards a consistent variety
At last week’s Society of Pension Consultants dinner, the Pensions Regulator’s outgoing chair Michael O’Higgins – after acknowledging his out-going had been stretched a little longer than expected – gave us a glimpse of the watchdog’s approach to DB regulation.
The regulator is set to take a more varied approach to scheme funding, reducing the emphasis on some of its former rigorously applied risk measures. But variation does not equal inconsistency, he assured delegates.
Central banks’ limbo on rates ramps up the challenge
The regulator’s new statutory objective to take into account the growth prospects of sponsoring employers, and the stubbornly tough market for matching liabilities, is clearly having an effect.
O’Higgins emphasised the importance of engaging with employers. A number of whom, interestingly, had complained to the watchdog about their frustration that they cannot influence trustees’ investment strategy.
Is this new closeness an all-round positive for schemes? In August, we reported it was sponsoring employers who were driving schemes to consider fiduciary management and bulk derisking.
The rush to get pension liabilities off the books is dovetailing with the concern to bring employers further into decision-making. I hope the cocktail does not have ill effects for promised benefits.
Flexibility is clearly the watchword. In the public sector, we have reported this week on Tyne & Wear Pension Fund, which is considering setting a discount rate that will give a lower deficit than the measure it used at its latest valuation.
In the FT last month, John Ralfe rounded on Universities Superannuation Scheme for using what he called the “actuaries’ magic pencil” to calculate – or in his view, understate – its liabilities.
But in a regulatory environment that is embracing flexibility given this tough funding climate, it is hardly surprising if schemes are taking advantage of it.
The European Central Bank pushed yields in shocked bond markets lower on Thursday by cutting is main refinancing rate to 0.25 per cent.
Central banks’ limbo on rates ramps up the challenge. Investors have to decide whether they think the current situation is to be a short-lived historical anomaly, or something more deep-seated. I’m relieved it’s not my call.
Ian Smith is editor of Pensions Week. You can follow him on Twitter @iankmsmith and the team @pensionsweek.