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By Donia O'Loughlin | Published Oct 11, 2012

Regulator: 75% of DB schemes must amend recovery plans

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Three quarters of defined benefit pension schemes need to adjust their recovery plans, with many needing to extend their current programmes and others needing to increase contributions and even making use of additional ‘flexibility’ in the regime, according to The Pensions Regulator.

New data published yesterday (10 October) found that a third of all DB schemes are likely to remain on track to meet their long-term liabilities with a three-year extension to their existing recovery plan and 10 per cent increase in pension contributions.

About 20 per cent of schemes could remain on track with a three-year extension to their existing recovery plan, a 10 per cent increase in contributions and making use of further flexibilities in the funding regime, such as allowing for greater investment outperformance in their recovery plan.

About 25 per cent of schemes would need to make maximum use of the flexibilities available in the funding framework because of the affordability challenges for their sponsoring employers.

Just 25 per cent of schemes would not need to amend their recovery plans.

In producing its scheme funding statement earlier this year, the regulator considered how best to achieve the right balance regulating appropriate funding, in particular giving due account to affordability for employers.

Stephen Soper, executive director of DB regulation, said: “Most schemes will be able to continue with previously agreed plans, or will need to make only slight adjustments. But others will find it extremely tough and will need to make maximum use of the flexibility the system affords.

“We’re working proactively with schemes to understand how we find a way through these difficult cases.”

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