Seeking to outline how UK defined benefit pension funds have used flexibility within the country's funding regime to address shortfalls, the Pensions Regulator said most schemes would still be able to continue with reduction plans as previously agreed, or increase payments in line with inflation.
The Pensions Regulator (TPR) also noted that the use of contingent assets had increased "about seven-fold", with more than one in five funds during the 2010-11 evaluation period using such assets in place of cash contributions. As of the most recent completed evaluation period, nearly 900 contingent-asset arrangements had been agreed – the majority being parent or group guarantees, followed by tangible assets such as real estate.
The regulator also calculated that one in five schemes would be forced to increase deficit reduction payments by more than 10 per cent, even if granted a three-year extension over current recovery proposals and with softened recovery assumptions in place. Responding to the regulator's publication, the National Association of Pension Funds said the data showed the "intense pressure" pension funds were currently under due to repeated rounds of quantitative easing and low gilt yields.
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