Comment | Con Keating


Ossa on Pelion – A tale of excessive misconceived regulation


Con Keating con2.keating@brightonrockgroup.co.uk


Con Keating is head of research at BrightonRock Group


This month Con Keating explains why errors and biases in the DB world are here to stay.


The Pensions Regulator’s Annual Funding State- ment provides yet another guide to the direction of travel for defined benefit (DB) scheme funding and regulation; it indicates we can expect consul- tation this summer on the proposed new DB Funding Code.


The new long-term funding target required for schemes can only mean yet more contributions from scheme sponsors – self-sufficiency and buy- out loom large. This approach, in common with much regula- tion, starts from a false premise: “Paying the promised benefits is the key objective for all schemes.” This simply isn’t true. It regards the fund as having responsibility for service of the sponsor employer’s pension promises.


16 | portfolio institutional | March 2019 | issue 82


We can go back to Sir Roy Goode’s early 1990s studies for the basic, and correct, insights: “…the employer’s statutory duty on wind up of a scheme is not to ensure that pensions are able to be paid when due but to pay the cash equivalent of the accrued rights.” And “by full funding we mean funding at a level sufficient to ensure that if at any time a scheme were to be discontinued the value of the assets would be not less than the accrued liabilities.” (Emphasis added) This views the fund as collateral security for the accrued promises of the sponsor employer. We have since introduced a statutory funding obligation which requires that an occupational pension scheme must have sufficient assets to cover its technical provisions. However, technical


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