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Bringing you news, views and analysis since 2013

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Budget 2013: The devil is in the detail

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The government has announced that it has abandoned plans to allow pension schemes to smooth asset and liability values. While this might disappoint some hoping for a less bumpy ride, the devil was most definitely in the detail, says Jonathan Smith (pictured), UK Strategic Solutions, Schroders…

In reality, smoothing would have only temporarily suppressed the true risk associated with providing defined benefit pensions, at exactly a time when sponsors and trustees should be focussing on managing this risk effectively.

In a further development, the Chancellor announced in today’s Budget that The Pensions Regulator (TPR) will take account of a scheme sponsor’s ability to maintain sustainable growth when assessing a defined benefit pension scheme’s funding plan. TPR will issue further detailed guidance in its annual funding statement shortly.  Greater flexibility will inevitably be welcomed; however additional flexibility should not come at the expense of robust funding and investment risk management.

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