The government says its new Pensions Bill imposes more “onerous duties” on trustees and other people involved in pension management.
As expected the bill also provided details of the proposed Pension Protection Fund and a new pensions regulator.
“The bill imposes more onerous duties on trustees, managers and other persons involved with pension schemes to provide information to the regulator,” the notes to the bill say. Indeed, the word ‘trustee’ appears 321 times in the 249-page bill. The word ‘consultant’ does not appear at all.
According to the text of the bill, individual trustees “must have knowledge and understanding” of pension and trust law as well as the principles relating to the funding of occupational pension schemes, and the investment of the assets of such schemes.
At least one third of scheme trustees must be nominated by the scheme members. And trustees must also inform members of their investment principles.
“Trustees must have knowledge about the issues that they deal with,” the government said. This is in response to the recommendations of the Myners Report on institutional investment.
“Where companies with under-funded pensions have gone bust, workers have found themselves severely short-changed on the pension they were expecting,” said pensions minister Andrew Smith. “With the Pension Protection Fund, people in pension schemes can be much surer that they will get the pension they were promised.”
Smith says the PPF would be complemented by a flexible Pensions Regulator which would make it easier for businesses to get on with running good pension schemes.
The new body would focus on under-funding, fraud and mal-administration. It would minimise interference in well-run schemes. The government said that schemes will be freed to set their investment strategy to their own particular characteristics. On scheme funding, it sought a “balance between schemes’ long-term liabilities and the assets they are required to hold on an on-going basis”.
Limited price indexation will be capped at 2.5% instead of five percent.
The National Association of Pension Funds says the bill lacked long-term vision. Chairman Terry Faulkner says that while few could argue with the spirit of the measures proposed, there was nothing in the bill to simplify the UK’s “archaic” pension system.
He says: “Is there anything to encourage firms to offer decent pensions to their employees, or keep existing schemes open? Are there new incentives to encourage people to save? Is there any real long-term vision, or a clear pension strategy to achieve that vision. Regrettably, the answer to all these questions is “No”.”
“Whilst considerable progress has been made to simplify pension tax regimes for the majority of people, I really wonder whether this Bill as a whole has in any way really achieved its objective,” says Gordon Pollock, chairman of the Association of Consulting Actuaries. He says he struggled to see how the bill would encourage wider provision.
The new bill is provisionally down to receive its second reading on March 2. The opposition Conservative Party has initiated a debate in the House of Commons entitled ‘Crisis in pension scheme wind-ups’.
The Confederation of British Industry says that while businesses supported the Pension Protection Fund, firms would be “dissatisfied” with government reassurances over the make up of the PPF levy.