Commenting on the consultation, Ben Roach, Partner at Barnett Waddingham, said: “This paper includes some wide-ranging recommendations by the WPC to the Government for addressing significant issues faced by DB schemes. The underlying theme is a request to empower The Pensions Regulator (TPR), the Pension Protection Fund (PPF) and scheme trustees to make decisions which help the sustainability of defined benefit pensions.
“The WPC has also recommended a review of TPR’s powers, including a ‘nuclear deterrent’ which could treble the amount payable by scheme sponsors and connected parties who are deemed to have avoided their pension obligations For ongoing schemes, a toughening of contribution requirements is suggested so that “recovery plans of more than ten years should be exceptional” and the use of TPR’s powers to impose contributions would be more commonplace.
“Small schemes are also considered, with the WPC keen to explore various consolidation options to achieve economies of scale and a recommendation to create a statutory aggregator fund which would provide employers with a more attractive option than buying out benefits with an insurance company.
“An interesting but challenging proposal is for schemes to be allowed to withhold or reduce future pension increases where these are unaffordable for the employer. Trustees would need to be involved in such decisions, which should not be taken lightly.
“There are a number of other suggestions, including incentivising good governance via a reduction in PPF levies for well-run schemes, a relaxation of rules for members cashing in small pensions and a change in the statutory timescales for valuation and recovery plan submissions from 15 months to nine months.
“Whilst we are still very much in the early days and these are only recommendations for consideration in the Government Green Paper, they do show a movement for change and a desire to consider radical options to alleviate some of the difficulties faced by struggling employers whilst requiring those who can afford it to fund schemes in a timely manner.”
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