UK – The UK government is to consult on the use of smoothed discount rates and consider introducing a new statutory objective for the Pensions Regulator (TPR), forcing it to evaluate the long-term affordability of deficit reduction plans.

Both announcements form part of chancellor George Osborne's Autumn Statement, which also saw the annual and lifetime tax-free allowance on pension savings cut to £40,000 (€49,000) and £1.25m, respectively.

Outlining its plans, the Treasury said it was "determined" to guarantee that the regulation of defined benefit (DB) funds did not "act as a brake on investment and growth", following earlier figures from TPR that showed a small number of listed companies would be forced to pay deficit reduction payments equivalent to half their dividend.

The Treasury said it would therefore work with the Department for Work & Pensions (DWP) to "consult on providing the Pensions Regulator with a new statutory objective to consider the long-term affordability of deficit recovery plans to sponsoring employers".

Business lobby CBI had previously argued for the regulator's statutory objectives to be amended, a call that at the time was rebuffed by TPR chief executive Bill Galvin.

The Treasury also announced it would consult on how to reduce the impact of deficits on pension funds by examining the discount rate currently employed.

Noting that shortfalls in pension funding made it harder for companies to attract external funding, it said: "DWP will also consult on whether to allow companies undergoing valuation in 2013 or later to smooth asset and liability values."

In response to today's announcement, the regulator's chairman Michael O'Higgins noted that it regulated within the framework set by government and parliament.

"It is for them to decide if the balance of that framework should change," he added.

O'Higgins said he welcomed the "wider debate" that would be triggered by both consultations.

"Whatever the outcome of the consultation, trustees will need to continue to act according to their fiduciary duties," he said.

The National Association of Pension Funds (NAPF) had previously called for TPR to be "empowered" to examine alternative discount rates, but at the time seemed less eager to accept smoothing as the best policy.

"It can still carry with it cliff‐edge effects, particularly where the smoothing is over a relatively short period, where the main impact in practice is to introduce a lag effect," it noted in a policy paper released in October.

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