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DB pensions will get greater protection under new proposals

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Workers with defined benefit (DB) pension schemes are to be given greater protection when things go wrong under new government rules.

The Department for Work and Pension’s ‘Protecting Defined Benefit Pension Schemes’ white paper outlined a package of measures designed to give The Pensions Regulator (TPR) more powers.

The government will strengthen TPR’s enforcement powers through a revised code of standards, including the power to impose substantial fines when corporate transfers have a detrimental impact on pension schemes.

The new rules will also hand TPR beefed-up powers to gather information from parties involved in supporting DB schemes and build on the existing process to support the disqualification of company directors.

The aim, says the government, is “to ensure that those who have diligently saved through their life have the secure retirement they deserve”.

Steve Webb, director of Policy at Royal London, said the government was in danger of ‘gesture’ politics: “Clamping down on employers who wilfully under-fund their pension schemes will obviously be a popular measure. But proving that someone has wilfully or recklessly failed to fund their company pension is likely to be extremely difficult, and company bosses are likely to have good lawyers. There is a risk that this is simply ‘gesture legislation’ which will never be used in practice.

“The other measures in the white paper also look worryingly slow. 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.”

Webb also questioned ‘voluntary’ notification to the regulators about pension funding on takeovers, adding that the government’s desire not to interfere in business transactions has taken priority over the desire to protect pensions.

Tom Selby, senior analyst at AJ Bell, agreed that the paper lacked grit: “The document is filled with suggestions of actions that could be taken to protect savers and prevent another BHS or Carillion-type disaster, but anyone hoping the government would come down on firms like a tonne of bricks will likely be disappointed.

“There are reasons for the government’s reticence in taking the hammer to firms sponsoring DB schemes. These companies are central to the UK economy, employing hundreds of thousands of people across all manner of sectors. Policymakers will therefore be keen to ensure any measures to protect pension scheme members do not disproportionately affect the ability of these businesses to spend and invest in the short-term – particularly with Brexit now just 12 months away…All in all, there is little in this paper that offers reassurance that we will not be reading about another Carillion or another BHS in the months and years to come.”

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