The Work and Pensions Committee has published its report which calls on the Government to consult on new enforcement powers for the Pensions Regulator (tPR). The Committee is seeking to put incentive structures in place to make it more likely that defined benefit pension schemes will be sustainable and that employers will honour their responsibilities. In turn, this will make it less likely that the Pension Protection Fund (PPF) will be called upon.
The report provides a number of recommendations with the most significant seeking to empower tPR to impose punitive fines, which could ‘treble’ the amount payable in relation to tPR’s anti-avoidance powers. The intention would be that such fines would not need to be imposed: they would act as a ‘nuclear deterrent’ to avoidance.
Other proposals unveiled by MPs include:
- Giving employers a maximum of 10 years to eliminate deficits except in exceptional circumstances
- Requiring speedier valuations of pension scheme assets and liabilities and forcing the most troubled schemes to undergo valuations more frequently
- Allowing trustees to change the indexation of pension benefits, especially in cases where the only alternative is insolvency
- Smaller schemes should be encouraged to merge with others and pool assets
- Asking the PPF to review its levy rules to ensure that smaller employers and mutual societies are not being unfairly penalised
- Reviewing the case for clearance in corporate transactions to be mandatory in certain circumstances where there is the greatest risk of material detriment to pension schemes
- Review of regulated apportionment arrangements in order to create a more streamlined process and for tPR to take more of an active approach to its involvement in their negotiations
Lesley Titcomb, chief executive of tPR, welcomed the Committee report’s recognition of the ‘robust and proportionate regulation’ and said that she would continue discussions with the Government about tPR’s powers.
The Government intends to publish a green paper on this issue in early 2017, so we expect to hear more about this in the coming months.