Support is declining among pension schemes for The Pension Regulators new Code of Practice, according to research Aon.
The professional services firm says that support has notably waned during the consultation period on these new rules, as the implication of this new regime become more apparent.
This new code of practice proposes a twin-track approach to regulation, with schemes able to opt for an off-the-peg fast track option or a more bespoke regulatory regime.
Aon sought the opinion of trustees and corporate sponsors in February, prior to the consultation being launched, and found 62 per cent were “tending to a positive” view of this new code, and only 8 per cent “tending to negative.”
However similar research conducted since the consultation period opened found only 47 per cent “tending to positive” and 20 per cent “tending to negative”.
Aon’s head of UK Retirement Policy Matthew Arends says: “There has been a noticeable change in sentiment from pension schemes over the last three months.
“We have seen a 12 per cent change in schemes’ responses indicating some growing scepticism that the consultation will deliver on its intentions. What isn’t clear is whether this is down to the pensions industry having had more time to digest the consultation, or whether it’s due to current conditions.
“Either way, it is likely to be a concern for TPR.”
Aon’s Fast Track Modeller tool has also analysed schemes’ current level of compliance against the expected Fast Track compliance test.
This breaks down Fast Track compliance into nine component tests. The analysis shows that approximately 20 per cent of schemes would already pass Fast Track compliance, and that this proportion rises to 37 per cent if schemes which fail on only one of the nine tests are also included.
These findings accord with schemes’ own views of whether they are likely to use Fast Track compliance at their next valuation – which stood at 27 per cent in Aon’s polling.
Arends adds: “On the face of it, it’s good news that approximately one in five pension schemes look able to take advantage of a reduced regulatory burden through Fast Track compliance once it comes into force. This ought to mean speedier and cheaper actuarial valuations in the future.
“However, more concerning is the implication that TPR will use the Fast Track tests for two other purposes: first as a yardstick against which to measure compliance under the alternative, Bespoke, route, and second, as the default outcome that TPR will be able to impose if it is not satisfied with the agreement that a company and trustee board reach.
“These are very different purposes from the original intention of a simplified compliance option.
“We are concerned that these other uses for the Fast Track tests will have the unintended consequences of driving schemes’ behaviours, ultimately encouraging adoption of a Fast Track approach even where it does not particularly suit the scheme’s situation.
“This is what happened under the old Minimum Funding Requirement regime and it ultimately proved detrimental to the whole pensions industry.”
