The Government has accepted the need for a minimum solvency requirement but proposes a transition period of five years, beginning in 1997 when legislation is expected to be introduced.
By then all schemes should have a schedule of contributions that will be needed to keep solvency at 100 per cent, or to ensure they are funded to reach that figure within three years - the maximum interval the White Paper suggests for actuarial valuations against the current three and a half years.
If a fund falls below 90 per cent solvency, the shortfall must be made good within three months either by cash injecton or its equivalent - a bank guarantee for example.
'We were surprised that the Government has retained the Goode report's three-month requirement but on the other hand the transition period extends until 2002,' said Richard Whitelam of Bacon & Woodrow, the consultant actuaries.
Ahead of the White Paper there had been fears that solvency needs would lead to wholesale selling of equities in favour of low- risk gilts - a point the Confederation of British Industry still felt was a risk.
'An obligation to maintain 100 per cent solvency, irrespective of short-term stock market fluctuations, could provoke large-scale switching from equities to gilts', it said.
But Edmond Warner of stockbrokers Kleinwort Benson predicted that such sales of equities as occurred would be more likely to be overseas equities because of the new emphasis contained in the White Paper on prudent investment standards.
'This is just about the most watered-down set of proposals that the equity market could have hoped for.'
Jane Platt, managing director at Barclays de Zoete Wedd Investment Management, said that the White Paper would have 'a nil impact' on the stock market although she added that as pensioners formed an ever larger proportion of pension schemes' members as opposed to active members, there would be an increasing trend towards fixed interest compared with equity investment.Reuse content