Defined Benefit  

Companies in favour of pension rule change

Companies in favour of pension rule change

The majority of UK companies (84 per cent) are in favour of a change in law that would allow their defined benefit (DB) schemes to pay lower annual pension increases during times of serious financial difficulty.

According to a survey conducted by the Association of Consulting Actuaries (ACA) among 349 employers of all sizes, 55 per cent felt the cost of their DB scheme was adversely impacting on their business performance.

With a pension bill in the works for next year, bosses would like to see new rules that would allow them to decrease the pension increases due to their scheme members.

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Jenny Condron, ACA chairwoman, said: "Employers are clearly disappointed that the recent DB white paper seemed to rule out the ability of more schemes to move to lower annual increases in pensions, in circumstances where the sponsoring employer is in serious financial difficulties. 

"This seems to be a sensible reform and one the government has widely followed itself across public sector schemes. 

"It seems totally unreasonable that private sector employers continue to be discriminated against and we trust the government will think again on this sensible reform."

The survey also showed 70 per cent of employers thought The Pensions Regulator needed more powers to help protect DB schemes.

However, 72 per cent of the respondents felt those powers should be targeted on unscrupulous employers as a priority, rather than toughening the funding requirements for all schemes, which was what was announced in the DB white paper.

Ms Condron said it was important that next year’s pension bill was proportionate and did not bring "a raft of complex legislation and additional regulation that adversely impacts on the funding and administration of thousands of well-run schemes, rather than focusing on the few errant ones that hit the headlines".

"It’s not yet clear that message has got through to government," she said.

The government's white paper set out that TPR would need to publish a new code of practice, and that the revised document will require that a long-term view is considered when schemes are setting the statutory funding objective. 

Ms Condron added: "Our survey found employers seem happy to see rogue directors or trustees pursued much more vigorously than has been the case to date, but they are far from convinced that a radical re-writing of the scheme funding code for DB schemes is justified.

"Targeted action would seem to be the priority not an ‘en masse’ change."

The Department for Work and Pensions (DWP) published a consultation in June regarding the watchdog’s new powers, which will include unlimited fines or a prison sentence for rogue bosses.

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

maria.espadinha@ft.com