Commenting on today’s publication of the Government’s Green Paper
on Defined Benefit Pension Schemes, and a letter from the
Pensions Minister (linked below) acknowledging the central role
of the Committee’s work in informing the Green Paper, Rt Hon
MP, Chair of the Committee,
said:
“The Committee welcomes the Green Paper’s comprehensive
consideration of the recommendations in our Defined Benefit
Pension Schemes report and the salutary lessons of BHS. We are
pleased at the major contribution that our work has made in
informing the Government’s thinking. Indeed I think the
effectiveness of the Government’s actions in this area will in
large measure be judged on whether it succeeds in preventing
another BHS.
“To that end we particularly welcome the Government’s decision to
consult on the option of adding the nuclear deterrent of punitive
fines to the Regulator’s arsenal of enforcement powers. While
noting the Government’s concerns about the threat of such fines
inhibiting investment activity, the point of a charge big enough
to act as a deterrent is that it would never need to be used: the
prospect of a significant penalty would concentrate minds on
achieving a timely resolution of scheme funding difficulties
before they become critical. An effective deterrent also surely
creates less of the uncertainty - and costs - that might scare
potential investors than a protracted court battle over a
settlement. The Government is right to explore the case for
considering stronger Regulator powers in this area.
“On consolidation, we are pleased that the Green Paper has put
forward a number of options which would help encourage greater
consolidation, but feel that if the market does not come up with
a workable solution then the Government should revisit the
question of whether it could helpfully fill that gap.
“On indexation, we agree with the Government that there are no
grounds for it to be abandoned or reduced across the board, but
welcome the proposal to examine whether there is a case
temporarily to reduce or suspend indexation in cases where the
employer is stressed and the scheme is underfunded, as long as
this is in members’ long-term interests.
“The kind of flexibility proposed in the Paper needs to work both
ways though: when better times return, and higher interest
rates are on offer, flexibility should be shown on the other side
in restoring workers’ previous expectations of pension
entitlements
“Rightly, the Government identifies the biggest risk to scheme
members as the collapse of the sponsoring employer, but there is
a broader risk of employers failing to take proper responsibility
for their schemes. In the case of BHS, while the final collapse
was triggered by sponsor insolvency, the fundamental cause was a
lamentable failure of corporate governance and abdication of
responsibility to scheme members. We hope that the legislation
that results from this, combined with the Government’s
consultation on corporate governance, will mark a clear shift
towards ensuring that more companies are better governed, in the
interests of all of those who depend on them.” / ENDS
Notes:
Letter from MP: http://www.parliament.uk/documents/commons-committees/work-and-pensions/Correspondence/From-Richard-Harrington-MP-to-Chair-re-Defined-Benefit-Pension-Schemes-Green-Paper-20-02-2017.pdf
