When it comes to funding Defined Benefit pension schemes, there is no such thing as the right answer.
There is a range of possible outcomes that may be considered reasonable and this does not always mean increased cash contributions.
The trustees are required by legislation to determine the valuation assumptions in a prudent manner. However, the company has just as much right to determine the contributions and investment strategy as the trustees. You should seek your own advice to challenge the trustees allowing them to utilise the cash in the business rather than locking it into the scheme. Atkin Pensions believes the company needs robust corporate actuarial valuation advice to ensure the company’s views and interests are taken into account.
There is no single right answer on the valuation assumptions, and trustee boards can be led towards excessive prudence in the absence of any challenge to their initial position. The company should challenge any proposed assumptions to ensure an appropriate degree of prudence rather than compound/serial prudence.
The trustees need to take account of the strength of the employer’s covenant and the company should present this in a robust way. The deficit should be paid off as soon as the company can reasonably afford it. The company is best placed to know what their business plan is and should take advice on how that fits in with payments to the scheme.
A key element of our approach to building the pension funding strategy into the overall corporate strategic planning process is not to waiting for the results of the scheme valuation to drive the next phase of scheme funding.
Atkin Pensions can also help with:
- Controlling the PPF Liability
- Reviewing adviser costs
- Dealing with the Pensions Regulator
- M&A activity