Watchdog gives struggling plans some breathing room
Total pension deficits have nearly quadrupled in the past year in the United Kingdom, but that's not an excuse to cut pension contributions, according to the U.K. Pensions Regulator.
The latest estimate of total pension deficits is $344 billion Cdn, much worse than deficits of $88 billion Cdn one year ago. The Pension Protection Fund, the country's official pension plan safety net, found only 812 of the nearly 7,800 defined benefit pension plans are in surplus (10 per cent), while the rest are all in the red.
In a statement, the pensions regulator recognized the difficulties these employers are facing but stressed companies shouldn't sacrifice pension plans in order to continue paying dividends to shareholders, nor should struggling pension plans bring companies down.
"There is no reason why a pension scheme deficit should push an otherwise viable employer into insolvency," said David Norgrove, chairman of the regulator.
The regulator will give companies the opportunity to renegotiate previously agreed upon plans to repair pension deficits.
This would give employers 10 years to make additional contributions to ensure the pension scheme can pay the benefits it promised. Any plan that took more than 10 years would face greater scrutiny from the watchdog.
