Articles

Nick considers whether some of the criticisms levelled at smaller schemes are deserved and voices concerns about the application of the new funding regime to these schemes as mapped out in the consultation document.

Some selected statistics from the 2019 Purple Book;

• Schemes with between 1 and 999 members make up 80% of all DB schemes
• Schemes with fewer than 100 members are significantly better funded on an estimated buyout basis (and PPF s179 basis) compared to any other category
• The modelling assesses that the smallest schemes have the highest insolvency probabilities (with schemes with fewer than 100 members being predicted as being more than twice as likely to go insolvent as those with more than 10,000 members)
• However, around 41% of schemes in PPF assessment are in respect of schemes with fewer than 100 members which is only a little higher than their share of all DB schemes at 36%. If they were twice as likely to go insolvent, we might expect smaller schemes to make a much higher percentage of the total number of schemes in PPF assessment. Suggesting that, at least anecdotally, the insolvency modelling perhaps might be being a bit harsh on these smaller schemes

Of course statistics are dangerous beasts at the best of times and can be selectively used to prove almost anything. My only point would be that smaller schemes, which make up the majority of DB schemes, perhaps get a harder time than they should. On some measures at least, they appear to be better funded than the largest schemes and are supported by covenants that are not significantly weaker.