Aon has highlighted concerns about the rigidity and potential repercussions of the UK Department for Work and Pensions’ consultation on the proposed Occupational Pension Schemes (Funding and Investment Strategy and Amendment) Regulations 2023.
In a webinar on September 26, 80 per cent of participants who responded to survey questions voiced concerns about the new funding regime’s course of action, reflecting the opinions of Aon clients. 20 per cent of the 80 per cent of respondents indicated they were “very concerned.”
Aon also discussed the unintended consequences that could occur if the regulations are implemented as they are, including a less flexible funding regime that is unable to quickly adapt to new types of volatility and changing financial conditions, which forces all schemes to adopt very similar risk management strategies, as well as higher pension costs for UK businesses, which will impede economic growth.
Aon partner and head of UK Retirement Policy Matthew Arends says: “While we support the overall objective of the draft regulations, we do have major doubts over whether the proposed legislation is sufficiently flexible and whether the consequences of these potential changes have been properly addressed.
“However, we agree that trustees of maturing schemes should consider a long-term target that covers both investment and funding level, as well as establishing a plan to move towards the target as the scheme becomes more mature. All this should be done with the employer’s agreement.
“With the absence of a proper impact assessment, along with the lack of a response from The Pensions Regulator to its 2020 consultation on scheme funding, these concerns remain. Schemes need continued flexibility and greater certainty to make better decisions.”