The government plans to increase the Pensions Regulator’s powers to require employers to provide contributions to a pension scheme if their actions could threaten the security of members’ pensions.
This would enable the regulator to reduce members’ risk by changes to pension schemes or corporate transactions. This would apply to the employer or investors who might wish to profit from a pension scheme. Currently the regulator only has this power where actions were intended to affect the pension scheme
The new proposals will only be targeted at risky situations to avoid putting too much burden on employers. The majority of pension schemes will be unaffected.
Minister for Pensions Reform, Mike O’Brien, said: “We need to ensure members’ interests are protected. I want to guard against pension schemes simply being treated as a commodity to be bought or sold. The most effective way to tackle the problem is to give the Regulator the power to require contributions to pension schemes when an employer’s actions reduce the security of members’ benefits. I want to see pensions secure and promises kept so that members can look forward to a happy retirement.”
However there is a chance that a large proportion of employers could become caught up in unintended consequences of the proposals.
Rashpal Bhabra, head of corporate consulting at Watson Wyatt, said: “These proposals were apparently motivated by concerns about business models that look to sever the link between the employer and the pension scheme. Yet,if they become law, many more companies could be affected. For instance, those involved in mergers and acquisitions, share buy backs, dividend payments and restructurings may find they have to go through a lengthy clearance process, simply to guard against the risk of retrospective action by the regulator.”
There will be an eight week-long consultation period to decide how the changes will operate.