The Social Welfare and Pensions Act 2012 introduced a
requirement for defined benefit pension schemes to maintain a risk
reserve of 15% over and above current liabilities. Under the
Occupational Pension Schemes (Funding Standard Reserve)
Regulations, 2013 (the "Funding Standard
Regulations") the risk reserve requirement is to be
reduced to 10% of the scheme's liabilities. Given the funding
difficulties being experienced by many defined benefit schemes,
this change is to be welcomed.
The Funding Standard Regulations also provide that additional
asset types can now be used to fulfil this obligation to hold a
reserve of assets. These new types of permitted lower risk assets
include: bonds which have been guaranteed by an EU Member State as
well as bonds created and issued by the Central Bank of a Member
State, the International Monetary Fund, the European Stability
Mechanism and other such bodies.
