UK – KPMG, which is acting as receiver at the failed ASW Holdings – whose pensioners have lost out following the winding up of its pension scheme – has backed the government’s plans to set up a pension protection fund.
The government yesterday unveiled plans to set up an insurance scheme to protect the rights of employees’ final salary occupational pension schemes if their employer goes into receivership or administration.
The decision was seen as being prompted in part by the plight of ASW pensioners.
Roger Oldfield, KPMG corporate recovery partner and the receiver of ASW, said: “I have witnessed the grave consequences that current pension legislation has had on employees and their families (whether or not they are near to retirement age) when their employer has gone into receivership.”
Oldfield and his colleague Richard Hill were appointed Joint Administrative Receivers to ASW Holdings on July 10 2002. The ASW pension scheme was wound up on July 19. “This decision has been taken solely to protect the interests of scheme members,” KPMG says.
“When you compare their situation to that of their colleagues, who may have retired a week earlier on a full pension before receivers were appointed, it is clear that those employees who remained were in an exceptionally unfair situation,” Oldfield says.
But Oldfield warned against complacency. “However, there are some serious practical issues involved in ensuring there are no loopholes. It is vital that the Government makes sure that the price is not so high that it drives more companies away from final salary schemes.
“In essence, any security mechanism must be sustainable and affordable.”
Brendan Barber, the general secretary of the Trades Union Congress, welcomed the proposal to set up a protection fund. He said: “The requirement on solvent employers who choose to wind up their pension schemes to meet their pension promise in full is an important move for members of occupational pensions, and will help to restore the pension promise made by employers.”
The TUC is calling for a compulsory pensions system in which all employers would contribute 10% of pay, if necessary phased in through a strict timetable starting at four percent.
Aon Consulting’s head of research, Simon Martin, said the government’s announcement “signals what could be the last nail in the coffin for final pension schemes”.
Martin added: “The proposed requirement for employers to have insurance schemes on pension funds that will offer full cover for pensioners and 90% for scheme members not yet at retirement age are unrealistic and excessively high.”
He said it will be impossible to insure the funds at “anything like a reasonable cost”.