The National Association of Pensions Funds has called on the Government to boost the power of trustees and end inflation indexing for defined benefit schemes as part of its efforts to reduce pensions red tape.
The NAPF wants the Government to make it easier for trustees to make changes to schemes, as well as calling for a reduction in “disproportionate” compliance and governance burdens and a loosening of requirements on trustees communications to scheme members. Rules governing employer debt to the trust in the event of corporate restructuring should also be changed, the NAPF argues.
NAPF chief executive Joanne Segars says: “For too long successive governments have applied layer upon layer of regulation on pensions and we now have one of the most complex systems in the world. We need to rethink if we are to have a system that works for members, employers and schemes, and provides good quality workplace pensions to future retirees.”
The NAPF has set out five areas it wants the Government to look at in its ’red tape challenge’:
- Inflation Indexation: The association says that inflation indexation has pushed up the costs of running DB schemes and that the Government should consider removing the requirement on newly accrued rights.
- Section 67 of the Pensions Act 1995: It requires pension scheme trustees to obtain members’ permission or an actuarial certificate for any changes made to a scheme which could adversely affect a member’s entitlement to benefits. The NAPF says it sets a “very high technical barrier” and leads to trustees becoming focused on process rather than making changes :for the greater good”.
- Section 75 of the Pensions Act 1995: Means the restructuring or sale of a company triggers a debt owed by the employer to the trustees of the company’s scheme. The NAPF says this can even happen when changes to a company have no effect on the fund and calls for The Pensions Regulator to intervene in such cases instead of the debt being automatically triggered.
- Interactions with the TPR: The Association says burdens around compliance and governance are seen as “disproportionate”, particularly for smaller schemes. It raises particular concerns around the time and effort spent on record keeping, and around data exchange and appeals processes for multi-employer schemes.
- Disclosure and Communications: The NAPF says current requirements are “overly prescriptive” while the information funds are required to provide is complex and unhelpful to members. Instead, there should be more focus on the principles of what information should be provided and trustees should then be left to communicate it to members.
“Getting a positive outcome from this red tape challenge would pave the way in opening up a spectrum of options for better sharing of risk between employers, individuals and the state, very much along the lines of the pensions minister’s ’defined ambition’ approach,” says Segars.