Increased TPR powers will not solve DB issues - Aon

Written by Theo Andrew

Increased powers for The Pensions Regulator will not be enough to help distressed pension schemes, Aon has found.

A poll taken during Aon’s Pensions Conference series found that nearly 70 per cent of 400 attendees said more powers for TPR would help, but that other changes would be required to fix the defined benefit pension schemes’ issues.

The Department for Work and Pensions is expected to release its defined benefit white paper this spring, in which it is highly anticipated the regulator will be given more powers.

Aon partner, Lynda Whitney, explained: "I would speculate that the white paper will propose that TPR receives new powers which would allow them to demand more information and to more easily commence winding-up of distressed schemes. But it was interesting to hear that over 70 per cent of Aon's conference audience did not think this would be enough."

Speaking at the Pensions and Lifetime Savings Association Investment Conference last Thursday, 8 March 2018, DWP deputy director of private pensions policy Ronan O’Connor hinted that alongside more powers for TPR, consolidation would also be considered.

Aon partner, Matthew Arends, said: "Using a new DB Chair's Statement as a 'comply or explain' tool will improve efficiency and drive consolidation where it is needed for the around 2,000 DB schemes with fewer than 100 members.

“This would create a climate for consolidation, encouraging larger, better governed, better managed and better invested schemes - unless trustees can demonstrate they can deliver to an equivalent standard."

Furthermore, greater accountability of scheme sponsors and more company director responsibility could potentially be implemented, by making sponsors deliver tri-annual statements laying out their objectives, in what he labelled “unambiguous standards”.

Arends added: "Theresa May is seeking tough new rules for company bosses. I believe they do need to think more about their pension schemes but draconian measures could damage the very companies that the schemes are relying on for support. Giving directors the duty to consider the pension scheme deficit before deciding on a dividend payment strikes a balance."

Other measures that Aon feel should be considered is making benefit compromises easier to achieve and allowing existing benefits to move from RPI to CPI, subject to trustee agreement.

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