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Increasing protection for pension scheme members - O'Brien

DEPARTMENT FOR WORK AND PENSIONS News Release (PENS-065) issued by The Government News Network on 14 April 2008

The Government plans to increase powers requiring employers to provide contributions to a pension scheme if their actions could threaten the security of members' pensions.

The changes would give the Pensions Regulator stronger powers to reduce the risk to members' interests by scheme changes or corporate transactions. They would apply to an employer or their associates, including investors in the employer who might seek to profit from the scheme. There will be an eight week consultation on these changes.

Minister for Pensions Reform Mike O'Brien said:

"The Pensions Regulator has done an excellent job in recent years but we need to ensure its powers keep pace with developments in the pensions market.

"Innovation is welcome, but I am concerned some emerging business models might not give the same protection for pension schemes as traditionally provided by a sponsoring employer or insurance capital. I spoke about this in a recent debate in the Commons. 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 this 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."

Mr O'Brien said the powers would only be targeted at risky situations to avoid putting onerous burdens on employers. The vast majority of pension schemes would not be affected.

He added: "These measures will also avoid new costs being placed on the Pension Protection Fund, which could ultimately be passed on to responsible employers through the PPF levy.

"The proposed changes would also allow the Pensions Regulator to require an employer or associate to make additional contributions to a scheme where a 'bulk transfer' has been carried out and was detrimental to the interests of members."

A statement setting out the proposals has been published on the DWP website today, which will be followed by a formal eight-week consultation period.
The Government intends that the core amendments should be effective from the date of this announcement (Monday, April 14); one minor amendment would be effective from April 27, 2004.

The changes require Parliamentary approval, and DWP intends to legislate at the earliest opportunity.

Notes to Editors
1. The full statement can be found at http://www.dwp.gov.uk/pensionsreform/latest_news.asp

2. The changes will not affect the vast majority of pension schemes. The Regulator has demonstrated that it takes a proportionate approach to regulating pension schemes, and only uses its powers where it is reasonable to do so. The Government will ensure new powers are appropriately targeted only when an employer's actions put pension scheme members' benefits at risk.

3. A bulk transfer is a transfer of members, assets and liabilities to another pension scheme.

Textphone: 020 3267 5145
Website: http://www.dwp.gov.uk