PLSA IC 18: Industry must stop directing ‘blame’ and focus on positive change for DB

Written by Theo Andrew
09/03/18

The pensions industry needs to focus less on directing retrospective "blame" and more on delivering positive change, it has been said.

Speaking at the Pensions and Lifetime Savings Association’s Investment Conference, Thursday 8 March, Whitbread Group director of pensions, Lesley Williams, said that retrospective action from the TPR has the habit of creating “bad publicity”, rather than focusing on change.

The comments were made at talk on building a more robust defined benefit sector, in which the Department for Work and Pensions deputy director of private pensions policy, Ronan O’Connor discussed the upcoming DB white paper and the effect it may have on the regulator.

Williams said: “What worries me is that headline cases like that [Carillion], lead to beating up the people that were involved in those cases and bad publicity about the pensions system, trying to blame people, rather than focusing on what we can do to change the system that we have today, to make it better for the future.

“Dumping responsibility for this on the trustees isn’t the answer and I think that’s what happens in these cases.”

In addition, Williams said that she thinks trustees have “very little in their arsenal” at the moment in order to fix there issues, and that more powers need to be given to them.

O’Connor argued that the TPR has already started to make some fundamental changes in the way it works, which will have a “positive effect” for members.

“The question for the white paper is, is that enough? Does it need more in its statutory armoury? And, what do we need to do?,” he said.

“It has been seen as reactive rather than proactive, and a lot of the powers the government has given to the regulator do come into force after something has gone wrong … what sort of things can we give the regulator to make sure they are taking into account the likely consequence of those decisions?”

In addition, O’Connor laid out potential plans on holding scheme sponsors to account, by making them deliver triennial statements laying out their objectives, in what he labelled “unambiguous standards”.

Also commenting on the session, PLSA chair Richard Butcher said that some of the regulator’s retrospective punishments have been “overly harsh” and that it could start to “demonise trustees”.

Butcher said: We’ve seen recently, with the Carillion case and other cases, an element of retrospective judgement being applied to trustees and I’m all for a faster, clearer regulator … but we are approaching, at the moment, an amount of retrospective judgement that is perhaps overly harsh.

“I wonder whether you think we have got the balance right … we shouldn’t necessarily punish people who have the wrong judgement, because the risk is that it will just demonise trustees and then who wants to be a trustee?”

In response, O’Connor said that it is an “incredibly difficult” thing for the regulator to pull off but that the government’s DB white paper might give the regulator the power to deal with it in the future.

“This is not about when you make a decision that doesn’t turn out the way you thought it would…It’s not a behaviour that’s prevalent among pension schemes, you see a couple of extreme examples and the regulator should be very clear that the regulator is going to be able to deal more easily with that sort of behaviour.”

“We are worried too much about demising people but we do shy away a little bit from objectively sitting down and saying, ‘did we do something wrong?’, so we struggle to learn.”

The DB white paper is to be published in the spring.

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