The NAPF has responded to the Department of Work and Pensions’ Call for Evidence on Pensions and Growth: whether to smooth assets and liabilities in scheme funding valuations. 

The NAPF welcomes the call for evidence but does not support the introduction of smoothing as proposed. Instead, the Government should take action to ensure that trustees, employers and their advisors can make full use of the flexibility in the existing regulatory regime when agreeing discount rate assumptions for their technical provisions. 

In the current economic conditions and with QE driving gilt yields very low, this would include schemes feeling able to shift away from a ‘risk-free’ gilts based approach, either through making an upward adjustment to gilts-based discount rates, or by adopting a return-on-assets approach to the discount rate.

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