UK Regulator to Seek Out At Risk Pensions

October 31, 2005 ( - The Pension Regulator, set up by the UK government in April to police the pension industry, has released guidelines to determine at-risk pension plans.

Reuters reports that the agency has published a consultation document telling the methods it intends to use to identify those plans in trouble of not funding members’ retirement.   The Regulator proposes that if a plan can not make up its shortfall within 10 years, the group may intervene with the plan.

According to Reuters, the Regulator’s report said a company that takes more than 10 years to close a deficit is at risk of a major fall to its financial strength.   The report said there can be no hard rule, though, since the financial strength of pensions varies on a case-by-case basis.   Consultant Watson Wyatt believes up to 2,000 UK plans could struggle to meet that 10-year deadline.

Pension fund deficits valued at tens of billions of pounds has led the UK to set up the Pension Protection Fund to protect the benefits of members of final-salary or defined benefit plans in the event a firm goes bankrupt.   Many firms have closed final-salary plans to new hires.

The Regulator’s 90-page report said it could also be prompted to act if fund trustees cannot agree with companies about how to plug scheme shortfalls.   In addition, it plans to use measures such as the UK’s FRS 17 accounting rule to help it decide if a plan’s funding status should trigger the group into taking action.

The consultation process will last 12 weeks and the Regulator plans to publish a statement on its regulatory approach and powers early next year.