Defined Benefit  

Pensions still at risk despite government measures

Pensions still at risk despite government measures

The defined benefit (DB) sector is still at risk despite the measures announced today (19 March) by the government in its 106-page white paper, several specialists have warned.

The main issue with the rules, which will grant new powers to The Pensions Regulator (TPR) to fine and prosecute company bosses that put their workers' gold plated pensions at risk, is that there isn't an expected timeline for the measures to be introduced.

Besides creating new legislation to introduce a criminal offence to punish those found to have committed wilful or grossly reckless behaviour in relation to a pension scheme, the government is also giving the watchdog powers to disqualify company directors, and introducing new punitive fines.

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Frank Field, chairman of the Work & Pensions select committee, welcomed the announcement of the new rules.

He said: "But for these measures to be an effective deterrent to the minority of employers wanting to shirk their pension obligations, there has to be a credible threat of them being deployed in full and at speed.

"This has been the problem with existing pension regulation powers, which laid largely dormant while the pension schemes at BHS and Carillion unravelled, with who knows how many more like them still waiting in the wings."

Mr Field argued that there "is a particular concern with the headline measure of criminal responsibility for directors," since similar steps were taken "in the light of the banking crisis but have yet to see any senior figures banged up".

The Work & Pensions select committee suggested new powers for The Pensions Regulator back in 2016, as these would provide what it described as a "nuclear deterrent" against another BHS-style scandal.

Legislation needed to enact the new regime in full will not happen before 2019 to 2020 at the earliest, the committee said.

Other experts agree with this view and were expecting more from the government's paper.

Alastair Meeks, pensions partner at law firm Pinsent Masons, said: "The eye-catching initiative is the introduction of a new criminal offence of wilful or grossly reckless behaviour in relation to a pension scheme. 

"However, this is vague, the extent still to be fully established and further consultation is to take place on it."

For David Everett, partner at pensions consultants LCP, the paper leaves much of the present regulatory framework intact, while only being able to set out in outline form what changes are intended to be delivered within an uncertain timeframe.

The government has backed away from its intention of giving the regulator powers to scrutinise takeovers, which was first announced in the Conservative Party manifesto.

Instead, it will investigate if the watchdog's current clearance process captures all appropriate transactions.

Tom Selby, senior analyst at AJ Bell, said: "The document is filled with suggestions of actions that could be taken to protect savers and prevent another BHS or Carillion-type disaster, but anyone hoping the government would come down on firms like a tonne of bricks will likely be disappointed.