Personal Finance: Pension Funds Given Some Breathing Space to Close Gap
A Government move to take some of the pressure off company pension schemes has been welcomed by a Birmingham-based adviser.
Changes to the minimum funding requirement (MFR) will allow funds with deficits of ten per cent or will now have three years to close the gap instead of the current one year.
And schemes whose liabilities outstrip assets by less than ten per cent will be given ten years to get back into surplus instead of the one year prescribed by the MFR.
The changes announced this week by the Department of Work and Pensions, which also included relaxing the certification process for funds in surplus, were welcomed by Andy Mewis, pensions expert at accountants Deloitte & Touche in Birmingham.
While not removing the threat to final salary schemes, which are being closed down at an increasing rate, the relaxation of the MFR rules were at least 'a step in the right direction', Mr Mewis said.
'The news is encouraging because it takes the Government's foot off the pedal and relieves some of the pressures on company pension funds.
'The changes should help to make it easier to maintain funds by taking away some of the administrative burden.'
Other professionals agreed. 'The announcement is an important step towards a more practical funding regime for hardpressed company pension schemes,' said David Astley, benefits director of the National Association of Pension Funds.
'By extending the time limits for schemes to make good underfunding, and removing the requirement for annual certification, these regulations will bring schemes some much needed relief from the burden of red tape. …