Budget 2013: Govt abandons smoothing plans

IT WAS announced in the Budget yesterday that smoothing would not be implemented after a call for evidence earlier this year found little support for the measure, Accountancy Age’s sister title Professional Pensions reports.

The Treasury said: “DWP’s call for evidence on asset and liability smoothing did not reveal a strong case for changing legislation to permit smoothing. The government will therefore not be pursuing this measure.”

The call for evidence had been announced in the Autumn statement in December as part of an attempt to “prevent defined benefit schemes acting as a brake on growth.”

PP revealed last week that the government was unlikely to proceed with the smoothing proposal after the majority of respondents rejected it.

Many respondents instead called for The Pensions Regulator to be more flexible in its interpretation of current legislation to allow schemes to base valuations on factors other than gilt-yields.

Reacting to the announcement, TPR chairman Michael O’Higgins said: “We will shortly publish an annual funding statement which will set out our guidance to trustees in the context of current economic circumstances, including the flexibilities available to trustees and company sponsors in the current regime, particularly the freedom to choose the basis on which contribution levels and valuations are calculated.

“We will engage fully with stakeholders and the industry on both the revision of the code of practice and the next annual funding statement.”

Commenting on the announcement, Institute and Faculty of Actuaries immediate-past president Jane Curtis (pictured) said: “[We] believe that the current legislative framework provides sufficient flexibility to meet the needs of sponsors of pension schemes, trustees and members.

“We therefore welcome the chancellor’s announcement today which demonstrates that the government has listened to industry concerns about smoothing.”