Lynda Whitney, partner at Aon, said: "The White Paper is part way between white and green – still a shade of minty green. It defines the areas where the DWP and tPR will and will not focus, but does not provide the level of detail needed to see the practical implications, so we expect several further consultations."
Funding
Lynda Whitney continued: "We will await with interest tPR’s revision of the Funding Code and associated guidance. The regulator’s annual funding statement, likely to be issued in the next few weeks, could show the direction of intent. Until the consultation on the Code it will be hard to see the detail of what strengthening these funding standards will mean in practice."
DB Chair's Statement
Matthew Arends, partner at Aon, added: "The DB Chair's Statement will focus schemes on key issues they should report to their members and could also be used to create a 'comply or explain' tool to improve efficiency. This would create a climate for consolidation, encouraging larger, better governed, better managed and better invested schemes - unless trustees can demonstrate they can deliver to an equivalent standard."
Consolidation
The DWP states “We are convinced of the significant benefits that consolidation can bring if legislative and regulatory frameworks are designed properly and risks mitigated."
Kevin Wesbroom, senior partner at Aon, said: “We welcome the emphasis given to the many methods of consolidation, as a way of driving up governance standards and improving members' outcomes. The DWP has a difficult balance to between protecting members' interests, while allowing the new vehicles to generate sufficient profits to attract the capital required to operate them.”
Enforcement
Lynda Whitney said: "We agree with the White Paper’s view that most schemes are well managed. We also support the power to punish those who deliberately put pension schemes at risk but expect this will be very few cases. We hope that the strengthening of the notifiable events framework will be effective and that it will not limit a company’s ability to undertake normal mergers, acquisitions and disposals - but tPR will need the resources to ensure that this extra demand can be met."
Collective Defined Contribution (CDC)
The White Paper confirms that the legislative process for CDC is likely to use the existing DC legislation (2011 Pensions Act), as was indicated by the Pensions Minister Guy Opperman at the Work and Pensions Committee last week
Kevin Wesbroom said:“While not directly part of the White Paper remit, it is encouraging to see that CDC schemes gain a mention in the foreword. CDC schemes are described as “a better way of providing a regular income in retirement than is otherwise available through DC pensions, but without the expensive guarantees of DB pensions.
“The White Paper foreword builds on the sense that progress is being made to take CDC from a concept to pension reality. This is something we wholeheartedly support because it would mean that savers would not need to make complex investment decisions, nor would they be at risk from outliving their savings.”
Actions companies and trustees can take now
Lynda Whitney said: "Despite a lot still being subject to consultation trustees and companies can start to consider whether they need a long-term funding target beyond their technical provisions. Trustees should also focus on their governance as supported by tPR's 21st Century Trustee campaign."
What we did not see
Lynda Whitney concluded: "What the DWP White Paper has dropped is also interesting. They are not planning to take forward the RPI/CPI debate, making clearance for M&A mandatory, nor improving the benefit compromise process.
“We believe benefit compromises should only be used where the pain is being shared with all stakeholders and where it offers members a better outcome than entering the PPF, but the current process for achieving this is complex and puts members at risk.
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