White Paper on protecting Defined Benefit Pension Schemes: What changes can trustees expect?
The Government has published a White Paper on the Protection of Defined Benefit Pension Schemes. This follows on from the Green Paper consultation which closed in May 2017 and explains the Government’s intention to introduce stronger powers for tPR, to revise the Code of Practice on Scheme funding, to encourage efficient Scheme consolidation and to introduce a new requirement of a Chair’s Statement.
The New Government White Paper indicates that the Government intends to take key actions to protect DB Schemes.
Increasing the Pensions Regulator’s Powers by:
- Providing tPR with a new power to fine those who deliberately put a pension scheme at risk (including those who are a target of a contribution notice)
- Creating a new criminal offence to punish wilful or grossly reckless behaviour of directors and connected persons
- Extending the scope of tPR’s powers to gather information, inspect records and require attendance of an interview
A revised Code of Practice to:
- Make the definitions of ‘prudent’ assessment of scheme liabilities and ‘appropriate’ factors in recovery plans clearer
- Provide assistance to trustees in establishing that a long-term view is taken when setting statutory funding objectives
A new requirement to appoint a Chair of Trustees with a duty to prepare a Chair’s Statement (in line with existing DC requirements) to contain:
- How the Scheme’s funding objective is being set in line with a long-term funding objective
- Key risks to meeting the objective and how these will be managed
The White Paper also confirmed that the Government does not intend to:
- Introduce any RPI/CPI override
- Make further changes to the multi-employer debt legislation after the introduction of the new Deferred Debt Arrangement.
TPR’s new powers should act to deter irresponsible exercise of duties in respect of pensions obligations. Clarification and support for trustees on assessing Scheme liabilities, coupled with further accountability to tPR in evaluating the risks of their objectives, should mean that more care and thought are put into the running of DB schemes, leading to better protection for members.