The Work and Pensions Committee's call for a review of The Pensions Regulator's powers, the PPF and pensions trustees "show a movement for change", it has been said.
According to Barnett Waddingham partner Ben Roach: “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."
Commenting on the Committee's proposals, Pensions and Lifetime Savings Association chief executive Joanne Segars said: “We are pleased to see that the Committee shares our view on the potential value of consolidation.
“As the Committee recognises, creating consolidators is a complex task where the details matter. "
Royal London Director of Policy Steve Webb also concurred that the majority of the Work and Pensions Committee's proposals are a move in the right direction.
"I believe the Select Committee have done an important job over the course of 2016 in challenging everyone involved in workplace pensions to do more to make sure that people get the pensions they have been promised. Many of the Committee's recommendations make a lot of sense, including finding ways of enabling smaller schemes to combine and investigating whether there are ways in which pension schemes destined for the Pension Protection Fund could be restructured to provide a better level of benefits."
Nonetheless, Webb claimed: "The idea of a 'penal' approach to employers who deliberately seek to evade their responsibilities towards their pension scheme is an interesting one and worth exploring, but I suspect it would be fraught with practical difficulties".
Furthermore, the proposal to give The Pensions Regulator additional powers to impose fines where employees fail to fulfil their pension duties was largely supported.
Intelligent Pensions head of pathways Andrew Pennie said: "Earlier and more effective engagement by TPR will increase the accountability and responsibility of employers to their DB schemes. If that can go any way to preventing schemes building up large deficits and potentially falling into the hands of the PPF, that has to be a good thing to help protect and preserve member pension benefits. [...]greater regulatory oversight and action will be a welcome comfort to the many millions of people in the UK with DB benefits."
Hargreaves Lansdown head of retirement Tom McPhail added: “The proposed Nuclear Deterrence of punitive fines where employers deliberately neglect their promises or seek to avoid their responsibilities could be used as part of a wider regulatory review to ensure that as far as possible, the Regulator never needs to actually pull the trigger.”
“Consolidation of schemes to reduce costs is an overwhelmingly good idea. Large schemes tend to be more efficient and are generally better at looking after members’ benefits. One solution may be to convert differing schemes’ benefit structures to a single consolidator scheme, on an actuarially neutral basis. The employers’ ongoing funding liabilities could also be converted to a long term debt, secured on the business.”
However McPhail opined: “Allowing transfers out of schemes without advisory protection could end in disaster; this proposal is likely to provoke some regulatory migraines. It is hard to see how it can be delivered without making significant compromises. Given the government baulked at the secondary annuity market, it is hard to see that they’ll embrace this idea.”
In addition, JLT head of corporate consulting Rob Dales warned: “We welcome proposals that will improve security of benefits for members, but it’s important that the Government doesn't use this as an opportunity to impose additional constraints on the commercial activities of the majority companies who run their schemes properly.
“Employers need to take action now to review their pensions strategy in conjunction with their business plans and the scheme trustees in advance of any potential nuclear deterrent. They'd also be wise to look at the contributions they are paying to fund deficits to ensure they are getting the best return, be it through the investment strategy of the scheme or through diverting these contributions to fund member option and liability reduction programmes.”
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