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Pensions and the new regulatory framework

Pensions and the new regulatory framework

Now is the natural time to consider whether your pensions strategy is robust enough.

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The Social Housing Regulator has published its new regulatory framework and code of practice which comes into effect on 1 April 2015. The implications are vast and pensions will form an integral part of any well considered governance strategy.

When you look at your current business plan how much of it relates to future pensions obligations and risks? With the introduction of the new code comes a natural time to consider whether your pensions strategy is robust enough not just to satisfy the regulator’s requirements but to make a real impact on the strength of your organisation’s resilience to stresses on the industry.

When drawing out the pensions implications of the framework you will need to focus on understanding cashflow timings by making robust and prudent assumptions and using stochastic stress testing beyond simple sensitivity testing. You will need to consider future expectations for market conditions and likely actions taken by pension scheme trustees in areas like investment strategy and prudence margins. Contributions might continue to increase for any number of reasons and it is important to understand the likelihood of these and the mitigation options available when taking a long term view of the overall risk exposure of your organisation.

It is also important to ensure that any pensions assumptions made, such as inflation, are consistent with others in your business plan. There will be significant areas of overlap between assumptions in various parts of your plan which actuarial input can help to align.

This may be an area that you have not considered in detail before.  If you would like to discuss this, please speak to your usual KPMG pensions contact or contact Steve Simkins.

© 2018 KPMG LLP, a UK limited liability partnership, and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved.

KPMG International Cooperative (“KPMG International”) is a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm.

This article represents the views of the author only, and does not necessarily represent the views or professional advice of KPMG in the UK.

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