The UK’s rescue fund for insolvent pension schemes, the Pension Protection Fund (PPF), has told lawmakers that pensions regulation should be tightened, giving the Pensions Regulator (TPR) the power to force pension schemes to be wound up at the request of trustees or the PPF.

In its written submission to the UK parliament’s Work and Pensions Committee, the PPF made several recommendations for the reform of pensions regulation that were described by the committee as strong and clear.

A broad inquiry is underway by the committee into the PPF and TPR, particularly in light of the collapse this year of the BHS retail chain.

In its submission, the PPF proposed making scheme funding regulation more interventionist.

Stressed schemes and those with poor funding and weak employers should go through a period of intensive scrutiny, it said, possibly having an independent trustee appointed.

The PPF said: “There could be a case for the regulator to have a new and broad power to require the wind-up of pension schemes, which could be triggered at the request of either the trustee or ourselves.”

The lifeboat fund also suggested the committee consider wider issues, such as the lack of scale across a large number of small schemes.

“Options for scheme consolidation should be considered,” it said.

It also said TPR should have punitive powers to fine employers that attempt to avoid pensions obligations.

The regulator itself has separately called for stricter pensions regulation in its submission.

However, consultancy JLT Employee Benefits warned against the PPF’s idea that the regulator should be given the ability to wind up a pension scheme.

Charles Cowling, director at the firm, said: “Whilst this is a reasonable and logical recommendation for the PPF to make, it could have dramatic consequences.”

He said that, while the PPF is rightly concerned about ‘zombie schemes’ that are highly likely to end up in the PPF, if it – through TPR – has the power to wind up a scheme it is worried about, it could use that power to require pension scheme contributions be enough to cover the annual increase in the PPF liabilities, or face a winding-up order.

“Indeed, this would be a logical position for the PPF to take, but it could be devastating,” Cowling said.

“It could force many pension schemes to wind up, whilst many employers could face huge increases in their contributions, and some employers could tip into insolvency.”

Meanwhile, the Association of Pension Lawyers said in its submission that it did not think pensions law, on the whole, needed any radical overhaul.

“The Pension Regulator’s anti-avoidance powers are already wide, and widening them further could hamper business,” it said.

Looking specifically at the BHS scenario, the association said it seemed many of the worrying events had taken place before the Pensions Act 2004 came into force.

“The BHS case should therefore not be used to suggest that current law is fundamentally flawed,” it said.

It has taken significant time for stakeholders to understand and work with the current framework, the association said in its submission, adding that there was no silver bullet and that the current framework was now working pretty well.

“Pensions legislation can’t prevent difficult economic times,” the lawyers’ association wrote. “Similarly, pensions legislation can’t prevent a business that isn’t viable from becoming insolvent.”

Meanwhile, the Association of Consulting Actuaries suggested the committee consider the role of all regulators that could have authority over actions that might affect pension scheme outcomes, and how they could use that power to influence good governance.

The politicians should also review regulations for different types of companies, making sure they meet the aims of good governance, and recognising that this could be interpreted differently for different company structures, the actuaries’ association said.

It also brought up the idea of switching pension indexation to CPI from RPI as a way of helping ailing schemes, as well as freeing up resources to let companies make bigger DC contributions – a change it said would aid inter-generational fairness.

“We also suggest that to introduce a mechanism whereby DB schemes could convert their benefits to a uniform scale would potentially simplify and improve the quality of administration, make it easier and more cost-effective for schemes to buy out their benefits, and facilitate consolidation of smaller DB schemes as well,” the association said.