In its 22-page consultation paper, the regulator stated that trustees and employers needed to work together in an open and transparent manner to manage risks and reach appropriate funding solutions that recognise their respective needs and flexibility.
It also suggested ways to improve knowledge among trustees and create ways for the employer to ensure the schemes were sustainable.
Jonathon Land, head of the pensions credit advisory team for PricewaterhouseCoopers, said: “A joined-up approach to investment, funding and covenant will help to reduce the risks DB schemes pose to companies.”
Helen Forrest, head of policy for the National Association of Pension Funds, said: “Collaboration between employers and trustees is crucial in establishing viable, long-term funding plans for DB schemes.”
The statement follows the department for work and pensions’ defined ambition pensions proposals and the regulator’s emphasis on better governance of defined contribution schemes.
However Neil MacGillivray, head of technical support for Sipp provider James Hay Partnership said that thousands of workers could be pushed out of employment to save companies money if funds accrued in a DB scheme were transferred to a DC model when members left the workplace.
He added: “I wonder what checks the government will have in place to ensure members are not prematurely forced out of costly DB schemes just because they can be easily switched into less expensive DC schemes once they leave, or are forced to leave, the company.”
Meanwhile proposals to ban pension schemes from auto-enrolment because they offer trail – part of a package of measures put forward by the DWP in its recent consultation Better Workplace Pensions: A Consultation on Charging – were slammed by the Association of Professional Financial Advisers.
Chris Hannant, director general of Apfa, said it was a “crude and innacurate measure of quality. Many employers are already set up for auto-enrolment, they should not have to revisit their arrangements at this late stage. We hope the DWP will rethink this proposal.”
Recommendations from the TPR consultation paper
• Trustees should work with the employer to assess and understand their business plans.
• Employers need to work with trustees, recognising the needs of the scheme and the trustees’ duties.
• Trustees should discuss with the employers how the various scheme risks interact and may impact on members.
• Trustees should seek to understand what sustainable growth looks like for their particular employer.
• Trustees should be cognisant of the investment strategy risks for scheme members and their employers.
Source: The Pensions Regulator