Union representatives have welcomed the new powers as protection against ‘smash and grab raids’ by corporate speculators.
The changes, which are to be backdated to the date of their announcement in April following an eight week consultation, will give the Pensions Regulator stronger powers to reduce the risk to members’ interests by scheme changes or corporate transactions.
Minister for pensions reform Mike O’Brien says the powers will only be targeted at risky situations to avoid putting onerous burdens on employers. The vast majority of pension schemes will not be affected, he says.
“Innovation is welcome, but I am concerned some emerging business models might not give the same protection for pension schemes as traditionally provided by a sponsoring employer or insurance capital.
“The most effective way to tackle this problem is to give the Regulator the power to require contributions to pension schemes when an employer’s actions reduce the security of members’ benefits. I want to see pensions secure and promises kept so that members can look forward to a happy retirement.”
Gary Tansley, a consultant at HamishWilson says: “The fact that the DWP wants the Regulator’s extended powers to be back-dated to the date of its announcement demonstrates that it is seriously concerned about the threat posed to defined-benefit pensions from various new alternatives to the insurance company buy-out. This has echoes of 11 June 2003, when the Government announced that solvent employers would become liable for a buy-out debt if they decided to wind up their pension scheme.”
TUC general secretary Brendan Barber says: “These measures will help protect pension schemes against smash and grab raids by unscrupulous investors. Pensions should be backed either by a sponsoring employer or a regulated insurance company. The Government is right to target business models that rely on operating in the occupational pensions realm instead of the insurance sector, where they would be required to hold more capital against their liabilities.”
