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Warning on trustee wind-up powers

New trustee powers to call in pension liabilities could result in companies going bust, warns Standard Life.

The warning follows the Department for Work and Pensions&#39 unveiling plans last month to allow trustees to wind up schemes if they think the employer is not committed to funding.

Standard believes the DWP&#39s move, coupled with new obligations for solvent companies winding up schemes to buy out benefits in full, could lead to firms going to the wall.

Standard and other pension specialists, including the Association of Consulting Actuaries, are concerned that the DWP&#39s proposals give too much power to trustees, who represent former as well as existing employees.

They argue that retired and deferred members could be better off if a scheme wound up and paid out at full buyout cost, which could push trustees to wind up schemes and potentially tip firms into insolvency. Firms with pension liabilities exceeding their market caps would be particularly vulnerable.

Standard Life senior technical manager John Lawson says: “These rules allow trus-tees to wind up a scheme if they are not happy with the firm&#39s commitment. Where the majority of members are no longer working for the company, it could become the trustees&#39 duty to wind up the scheme, risking the company&#39s solvency.”

ACA spokesman David Robertson says: “There is a clear danger that these regulations empower trustees to a greater level than is desirable.”

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