Out-Law News | 20 Mar 2018 | 4:52 pm | 2 min. read
The government has also confirmed its intention to create a new criminal offence to punish wilful or reckless behaviour by company directors in relation to a pension scheme, in a paper which follows on from last year's consultation on the "security and stability" of DB pensions.
However, pensions expert Alastair Meeks of Pinsent Masons, the law firm behind Out-Law.com, said that the government's response was "notable for the things that it isn't doing rather than for the things that it is".
"The eye-catching initiative is the introduction of a new criminal offence of wilful or grossly reckless behaviour in relation to a pension scheme," he said. "However, this is vague, the extent still to be fully established, and further consultation is to take place on it."
"What we have is a bundle of small-scale measures that are probably modestly helpful changes, though we doubt whether they will make that much difference in practice. Under its breath, the government seems to be acknowledging that the current regime strikes a reasonable balance between protection of benefits and commercial enterprise. It's just a shame that it couldn't make much more of that in the paper," he said.
In last year's consultation paper, the government proposed allowing employers funding "stressed" DB schemes to change the way in which they uprate member benefits from the retail price index (RPI) to the consumer price index (CPI) measure of inflation, or even to suspend indexation altogether for a short period where this is in the best interests of the scheme members. Plans to give TPR more powers to intervene in proposed corporate mergers involving DB schemes have also been dropped.
"The majority of respondents, particularly employers and business organisations, were concerned that going even further with proposals for targeted mandatory clearance could stifle legitimate business activity such as corporate restructuring and could adversely impact on employment prospects," the government said in its paper. "It was also suggested that the regulatory system of DB pensions already makes the UK less attractive to investors."
Instead, the government said that it would "work with the Regulator to strengthen the existing notifiable events framework and voluntary clearance regime so that employers have appropriate regard to pension considerations in any relevant corporate transactions". This would include "improving the effectiveness and efficiency of the Regulator's existing anti-avoidance powers", it said.
The government will implement "a new package of measures to optimise scheme funding", including by way of a revised and strengthened funding code of practice. DB trustees will also be required to appoint a chair, whose duties will include providing TPR with a 'chair's statement' to be submitted alongside the scheme's triennial valuation.
It has also proposed a package of measures to raise awareness of potential benefits of scheme consolidation for small and medium-sized schemes in particular. It will consult on a new legislative framework and authorisation regime and a new accreditation regime; and will consider some minor changes to the rules around guaranteed minimum pensions (GMP) conversion in order to simplify existing benefit structures and make consolidation easier.
The government has proposed a "phased approach" to its proposed changes, although some will require further consultation and primary legislation.