Trustees and sponsoring employers of defined benefit pension schemes must do more to protect member benefits, The Pensions Regulator (TPR) has warned.
In its annual funding statement, TPR says strong employers should consider contributing more money to reduce scheme deficits over a shorter period of time, especially where they are paying out high dividends.
Where there is a weak employer, trustees and employers should work together to give greater consideration to the needs of the scheme.
TPR said it remains concerned about the growing disparity between dividends and deficit-reduction payments and expects fair treatment between shareholders and trustees.
It said it will act if a scheme is not treated fairly by using existing powers, while working with government to implement new powers proposed in the Department for Work and Pensions’ defined benefit white paper.
At the same time, TPR has stepped up its proactive defined benefit funding case work by 90 percent to support trustees as they prepare valuations and recovery plans.
Anthony Raymond, interim executive director of regulatory policy, said: “In our 2018 annual funding statement we are being clearer about our expectations of how trustees should approach their scheme valuations.
“Recent corporate failures have shown the risks of long recovery plans while payments to shareholders are excessive, relative to deficit-repair contributions.
“Trustees should negotiate robustly with the sponsoring employer to secure a fair deal for the pension scheme, while employers should balance the interests of pension savers with returns to shareholders and investors. We are working more closely than ever with trustees to support them in this process.
“However, if trustees fail to act we can intervene to protect members by using the full range of powers available to us now. We are also working with government to implement its white paper proposals.”