UK - The UK's Department for Work and Pensions (DWP) has issued an informal consultation on whether to revise the rules relating to employer debt provisions.
The Section 75 Employer Debt provisions specify how an employer meets any funding shortfall when it severs links with a defined benefit (DB) scheme, in an effort to stop employers from avoiding pension liabilities.
In practice these regulations can trigger a debt if a sponsoring employer restructures its operations, so the government announced amendments in April to make the regime "more flexible". (See earlier IPE articles: TPR updates employer debt guidance and Employer debt changes "increase regulatory burden")
However, following further representations from business organisations such as the Confederation of British Industry (CBI), Rosie Winterton, the pensions minister, has confirmed the start of an "informal" consultation on further changes.
The DWP's four-week consultation intends to focus on whether a s75 debt should not be triggered in certain circumstances, such as the group reconstruction of employers in a multi-employer scheme where the original covenant or commitment to the scheme is "strong", or if after the restructuring the remaining employers covenant is still considered strong enough.
Winterton said: "Where government can help ease the burden on employers who run pension schemes at this time we should, but not at the expense of protecting people's pensions. We are seeking views on the possible options for not triggering a debt where the employer remains committed to the pension scheme."
However she admitted: "This is a difficult area, and it may not be easy to find a way to address the issues without creating loopholes. But I want to work with industry in this difficult time to provide what practical help we can that will enable them to continue operating their DB schemes for their employees."
Joanne Segars, chief executive of the National Association of Pension Funds (NAPF), highlighted the employer debt regulation had been a "long running concern for both employers and pension funds".
She said: "Last year, DB pension funds who were still open to new members told us that relaxing the way these regulations worked in practice was the most important action government could take in helping them run their schemes."
"These changes will help recognise the right of employers to undertake corporate transactions and restructurings without adversely affecting member protection," added Segars.
Meanwhile the Pension Protection Fund (PPF) has revealed a further five pension schemes have entered the fund, which equates to an additional 1,313 people receiving compensation following the winding-up of an underfunded scheme.
Following the approval of the five new schemes, the PPF is now responsible for paying benefits to 20, 262 people, from 66 schemes, and between 2 October and 1 November 2008 it paid out more than £3.2m in compensation.
The confirmation of more schemes entering the PPF following insolvencies by sponsoring employers follows the latest figures from the Bank of England's inflation report which showed Consumer Price Inflation (CPI) rose above 5% in September.
Despite this, Mervyn King, governor of the Bank of England, revealed the downward revision to the inflation outlook of the report "is the largest in any one quarter since the Monetary Policy Committee was set up".
The outlook suggests CPI will "sharply" fall from its current level of 5.2% to reach its target figure of 2% by the second half of 2009, before then moving "materially below the target", as domestic energy and food price declines, following large falls in commodity prices.
Meanwhile despite the good news from the Bank of England, HM Treasury has established two new government-industry groups including one on asset management, which will be co-chaired by Alistair Darling, Chancellor of the Exchequer, and Robert Jenkins, chairman of the Investment Management Association (IMA).
The asset management group, part of the 2006 decision to implement a high level group of senior representatives from the financial sector, will hold its first meeting in December, and will consider a "wide range of strategic issues across the industry" including closed and open-ended funds, and mandate based asset management.
If you have any comments you would like to add to this or any other story, contact Nyree Stewart on + 44 (0)20 7261 4618 or email nyree.stewart@ipe.com
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