Trustees of defined benefit schemes will have to comply with the minimum fund requirement (MFR) for ...
Trustees of defined benefit schemes will have to comply with the minimum fund requirement (MFR) for several more years even though it is on its way out.
While the Chancellor said he would adopt the recommendations of the Myners Report to scrap MFR, until the Government enacts the relevant legislation, the MFR remains in place.
If a scheme is found to be less than 90% funded today it has 12 months to return to 90% but a transitionary arrangement actually gives it to 5 April 2003. To get to 100% funded the transitionary arrangement ends in 5 April 2007.
Stewart Ritchie, pensions director at Scottish Equitable, said: 'Trustees still have to meet the current timetable for MFR and they should be getting properly briefed by their scheme actuaries.'
Amid the talk of the abolition of MFR has been the idea that pension schemes will change the way they invest, moving away from a reliance on gilts. Ritchie said: 'There is a fallacy in the pensions world that MFR restricts investment policy, the stronger reason than MFR for funds to look to bonds has been the maturity of their liabilities.
'It is more likely than not that they will have no room for MFR changes in the next Parliament. We still need to have a consensus on a replacement. It would be dangerous for the Government to introduce a bill that would abolish it as they would be criticised for removing a safety net for employees without a replacement.'
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