Pensions - Articles - Pension schemes will have to provide a Chairs statement


Commenting on the White Paper’s message that the government will come down heavily on employers who act in a way that is detrimental to their pension scheme, Clive Fortes, Partner, Hymans Robertson says:

 “The Pensions Regulator should not have to wait for a crime to be committed before having the power to intervene, so today’s White Paper recommendations are welcome. We are strongly supportive of the need to stamp out unscrupulous behaviour by scheme sponsors. The threat of criminal conviction should act as an effective deterrent against employers wilfully doing the wrong thing by members of their pension scheme.

 “But we must remember that the vast majority of employers work hard to do the right thing by the members of their DB pension schemes, working collaboratively with the trustees to deliver members’ benefits in full. Since the start of the millennium UK employers have collectively contributed over £500bn into their pension schemes although deficits remain stubbornly high.

 “Inevitably there will be a few employers who put individuals’ DB pensions at risk. It is, however, essential to be able to distinguish between deliberate acts by an employer that put members’ benefits at risk and, for example, poor investment outcomes flowing from the trustees’ investment strategy or poor business decisions leading to the failure of the sponsoring employer.

 Commenting on the Government’s support for consolidation and the requirement for a Chair’s Statement, Calum Cooper, Partner, Hymans Robertson says: “While it is great that the Government is planning to consult on a framework for consolidation, the reality is that we don’t need legislative change for more innovation to happen. The creation of an accreditation regime will undoubtedly help to build confidence in consolidation as an option, encouraging more schemes to looks for ways to benefit from scale.

 “The requirement for schemes to provide a Chair’s statement is a simple, but very positive, move that would help actively stimulate better value for money in DB schemes. It takes the lead from the DC world where this is now commonplace.

 “Most schemes expect to pay pensions in full. The question is how to do it, and this will help. It could be the basis for asking trustees to consciously consider why their current operational model and governance offers their members great value for money. This would naturally require a consideration of alternative ways to deliver members’ pensions and would either re-affirm or improve operations and governance. It would also stimulate commercial innovation and competition to deliver better member outcomes in new ways.”
  

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