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TPR chief warns transfers pose liquidity risks for DB schemes

TPR chief warns transfers pose liquidity risks for DB schemes

The Pensions Regulator (TPR) chief executive Lesley Titcomb has warned a rise in transfers out of defined benefit (DB) pensions may result in liquidity issues for some schemes.

Speaking at the Pensions Lifetime and Savings (PLSA) annual conference Titcomb (pictured) said she was concerned the increased popularity of DB transfers would leave some schemes without enough money to cover outflows. 

 

‘There are liquidity challenges potentially for some schemes,’ she said. ‘We are monitoring that closely and it isn’t a problem as yet. But one thing I have learned from this job is the situation can change very quickly and we will probably be having an entirely different conversation in six months’ time.’

Titcomb added she did not believe DB transfers were causing funding issues for schemes but again said this is something TPR is ‘monitoring closely’.

Funding has been a major issue this year with high-profile cases such as BHS attracting national media attention. The Department for Work and Pensions released a green paper earlier this year addressing some of the challenges facing schemes.

Titcomb said the ‘majority’ of schemes have the ability to meet their obligations but recognised the deficits of many schemes have risen sharply in recent years.

She also said TPR was concerned that members did not have enough information when deciding to transfer out of their pension

‘Are people who are deciding to make a transfer doing so on a fully informed basis? Do they really understand what they are giving up and what can we do to help trustees to support them? Our focus is on getting all the information they need. Do they know for example about spouse’s independence? So are people in a position to make a fully informed decision?’

 

TPR has recently been given more power to address DB funding, and one of its most powerful tools is a Section 231 which forces the employer to a schedule of contributions if ‘we are not satisfied with what has been agreed between a trustee and employer’. This power has not been issued before.

‘I can confirm that we have issued a warning notice in respect of a section 231 case,’ Titcomb said. ‘It will not surprise you to hear I am not going to say any more about it, other than it demonstrates we can and will intervene if we see a scheme being treated unfairly and we have other potential cases in the pipeline.’ 

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