Defined BenefitJun 26 2019

Pensions regulator has 50 DB schemes on watchlist

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Pensions regulator has 50 DB schemes on watchlist

The Pensions Regulator has two watchlists of defined benefit schemes its officials are most worried about, its new chief executive revealed.

At a Work and Pensions select committee hearing today (June 26), Charles Counsell said these watchlists, one with a short term horizon and the other with a long term view, had 50 DB schemes which TPR kept a careful eye on.

Mr Counsell said: “I worry about any scheme which is in deficit, because we want all schemes to ultimately be able to pay full benefits to members, but equally I recognise that it takes time for employers to fully fund pension schemes.”

He noted that these watchlists, which are constantly being reviewed by the watchdog, are shared with the Pension Protection Fund, as the two organisations share intelligence.

The Railways Pension Scheme is one of the DB pension schemes on watch, Mr Counsell revealed.

FTAdviser reported in April that the Work and Pensions select committee questioned TPR about its engagement with the scheme, which is reported to have a deficit of £5-£6bn.

The Department for Transport disqualified Stagecoach, which owns 49 per cent of Virgin Rail Group, from bidding for three current UK rail franchises, amid concerns it is a "pension risk".

The Railways Pension Scheme is split into a number of sections which cover the franchised train operating companies.

The sections operate on a shared cost basis with the employer responsible for 60 per cent of the total contributions payable to the scheme and the employees responsible for 40 per cent.

The privatisation of the UK railway in the 1990s resulted in a franchised train operator's obligation to the railway pension scheme being limited to paying the employer contributions due for the period of its franchise with no operator being held responsible for any scheme deficit at the end of the franchise.

Mr Counsell revealed the regulator took specific action against one rail operating company because of the balance of the dividend payments and contributions to the pension scheme.

He said: "That action led to the current talks that are under way about what a long term solution for this scheme is. We remain very actively involved in those discussions, and I expect an outcome on this later this year."

Today’s hearing was the first step of the Work and Pensions committee new inquiry into the regulator’s priorities and approach.

The MPs said that since the collapse of British high street chain BHS, followed by outsourcer Carillion, which both left large pension scheme deficits, the committee has conducted intensive scrutiny of the role and powers of TPR and how it uses them.