A Government white paper has confirmed The Pensions Regulator will be given stronger powers to oversee defined benefit pension schemes.
The Department for Work and Pensions today published the defined benefit pension schemes white paper, which proposes changes to strengthen DB schemes.
In recent months, DB schemes at BHS, Carillion and Toys ’R’ Us have made headlines for putting their employees’ retirement savings at risk.
The white paper confirms additional powers for TPR to fine those whose deliberate actions put pension schemes at risk.
As well as fines, forthcoming legislation will introduce a criminal offence to punish those who have committed “wilful or grossly reckless behaviour” in relation to a pension scheme.
The paper says TPR will also get information to conduct investigations “effectively and efficiently” and those powers will be supported by penalties.
The paper says: “Taken together, these new powers will strengthen the deterrent against and punishment for reckless behaviour and give the regulator the ability to respond more quickly and decisively where they believe wrongdoing has taken place.”
The paper says measures will also be introduced around scheme funding. These include TPR being able to enforce scheme funding standards through an updated code of practice, and requiring trustees of DB schemes to appoint a chair who will be required to regularly submit a statement to the regulator.
The paper also outlines proposals on consolidation in the sector. It says new consolidation vehicles, such as the Pension and Lifetime Savings Association’s proposed superfund model could offer more affordable options than insured buy-outs. The paper says the Government will consult this year on legislation and an authorisation programme that such vehicles could operate in.
It will also consult on an accreditation regime to try and build confidence in existing forms of consolidation.
TPR chief executive Lesley Titcomb welcomes the proposals in the paper.
Titcomb says: “We will now work closely with government to develop the white paper’s proposals, including fines and criminal sanctions, to ensure they are proportionate, act as an effective deterrent and work in practice.”
She adds: “The best support for a DB scheme is a strong employer and we believe the current flexible funding framework, which allows employers to balance growth with meeting pension benefits, remains the right approach and we will aim to retain this flexibility in any new approach.”
However Royal London policy director Steve Webb says the paper’s measures are at risk of being “gesture” legislation.
Webb says: “Helping small pension schemes to consolidate into larger schemes could be helpful, but legislation appears to be years away. With an act of parliament likely to have to wait until 2019/20 and further detailed regulations needed after that, it could be a long time before today’s paper has any practical impact.”