Legal & General is calling on The Pensions Regulator to “show some backbone” and crack down on employers that abandon defined-benefit schemes rather than passing responsibility on to trustees.
The company says it agrees with TPR’s views that scheme abandonment can rarely be justified. But in its response to consultation on TPR’s new guidance on the abandonment of DB schemes, it says it should punish employers that walk away from DB schemes without properly justifying the move.
The insurer is concerned that too much responsibility is being passed on to already overburdened trustees although TPR says the responsibilities of trustees are enshrined in legislation.
In situations where the employer is unable to pay benefits in full without going bust, L&G says it may be better for trustees and TPR to agree to a compromise arrangement in the form of a big cash injection to fund reduced benefits rather than “for all parties to struggle on and eventually fall into the PPF” later.
But TPR says it cannot approve arrangements and can only issue a clearance statement if an arrangement does not require it to step in.
L&G says longevity instruments could prove to be a “white knight” for the beleaguered final-salary sector and wants TPR to address why the market has failed to take off. It says the Government should issue longevity bonds to boost the market.
L&G says: “TPR has a wide range of powers and discretions and should be prepared and be seen to be using these and not relying on passing responsibility to already overburdened trustees.”
A TPR spokeswoman says: “We fully consider the circumstances of each individual case and would use our powers where deemed appropriate.”