The Pensions and Lifetime Savings Association, Sackers and Barnett Waddingham have all revealed a cautious welcome to a stronger TPR, as both criticise areas of the Department for Work and Pensions’ defined benefit consultation.
The Protecting defined benefit pension schemes – a stronger Pensions Regulator consultation, which closed 21 August, has already been criticised in part by The Association of Consulting Actuaries, who said some proposals might lead to unforeseen consequences.
Sackers partner Faith Dickson is overall positive to a stronger TPR but said a radical overhaul of TPR’s powers in its existing form would “raise the stakes considerably for all employers and trustees involved in occupational pension schemes”.
“The impact of the new powers is highly dependent on careful and clear drafting, in order to avoid unintended consequences. TPR’s resources and its ability and appetite to use any new powers will also be crucial,” Dickson said.
In the consultation, DWP suggested implementing clearer regulation through areas such as a notifiable events framework, declaration of intent and improved regulator powers, which Dickson would have liked amended.
“In our view, the key to success will be to focus on making sure that their powers are clear and that they can be used quickly, to ensure that the new regime operates as intended.”
PLSA agrees that the difficulties DB schemes are facing require bold action through additional information gathering powers, increased penalties and updated requirements on when and how companies should offer additional financial contributions to a pension scheme.
PLSA policy lead for LGPS and DB Tiffany Tsang said TPR is at the heart of the process: “However, much more detail is needed to ensure that the new powers work and are used proportionately. For instance, it is currently unclear how often the new civil and criminal sanctions powers are intended to be used, and how they will fit into the criminal justice system.”
“There must be a joined up approach with criminal justice agencies and we believe further clarity around the formal stages leading to enforcement action should be included in draft legislation or through guidance,” she said in a statement.
Barnett Waddingham partner Andrew Vaughan also welcomes the steps to improve securities, but thinks companies sponsoring DB schemes would do well to read the small print of this recent consultation.
“All in all, the proposals in the consultation would significantly increase the administrative burden for DB scheme sponsors and could, in some cases, result in a constraint on certain types of corporate activity.”
Vaughan said companies wanting to push a transaction through quickly would under the proposals need a Declaration of Intent, which could impede the progress of a transaction. Another potential issue could be the proposal to expand the notifiable event regime to include notifications relating to company debt.
“Structuring company debt and refinancing can be a complicated enough process for companies without the additional burden of needing to consider whether a particular change will result in a notification to TPR,” Vaughan said.
“One of the main concerns will be keeping track of the number of different potential events that require communication to TPR. This is of particular relevance given the DWP’s proposal to increase the level of fines which can be dealt out for non-compliance.”