In April, the then pensions minister Mike O’Brien gave a speech to the NAPF on ‘buyouts and keeping the pensions promise’ outlining the need for the pensions regulator to have greater power to protect members of schemes that are subject to non-insured corporate buyouts.
His speech came amid fears that some investors might seek to profit from valuable schemes leaving the Pension Protection Fund and its contributors to foot the bill should a scheme fail.
Because the PPF only protects 90 per cent of the final salary benefit to a maximum cap of around £28,000, members would also lose out if their scheme were to fail as a result of a corporate buyer not properly managing a schemes’ financial risks.
O’Brien said at the time “a pension should equal a promise. Not just a commodity to be bought and sold regardless of the consequences”.
But following the latest Cabinet reshuffle O’Brien is no longer at the Department for Work and Pensions to follow through on his promises and so it has been left to new pensions minister Rosie Winterton to take up the challenge.
Earlier this week, Winterton revealed the Government had tabled amendments to the Pensions Bill giving the Pensions Regulator more powers to force the pension scheme owner to put up extra cash in circumstances where it fears their actions are endangering members’ benefits.
A draft list of these circumstances published by the Pensions Regulator includes the transfer of a scheme offshore, the severing of employer support for a scheme and the transfer of a scheme’s liabilities to another scheme that is not sufficiently well-funded.
The Confederation of British Industry has welcomed the Government’s amendment, despite earlier fears over “regulatory creep”.
Head of pensions policy Neil Carberry says: “There have been dramatic changes in the legislative approach of the Government. Businesses can now see the shape of the regulation in the announcement, as well as the safeguards that have been included. We have got a good position, which will allow the Pensions Regulator to do its job while businesses do theirs.”
Meanwhile, the Association of British Insurers has also been busy making promises of its own with an initiative to bring down the time it takes for annuity transfers to go through to 30 calendar days.
Fifteen of the ABI’s members have signed up to the initiative, which will use electronic information exchanges developed by Origo to speed the process up.
Hargreaves Lansdown pensions analyst Nigel Callaghan says that currently, in some of the worst cases, transfers can take up to three months, but the average is similar to the initial target the ABI has set. He would like to see this come down to two weeks within the next year.
The problem is of course, that the ABI members not yet participating in the initiative may well be the ones with the longest delays, and probably those showing their willingness to engage may well not be the worst offenders.