In response to the Government’s consultation over the future of the British Steel Pension Scheme (BSPS), Hymans Robertson, the leading pensions, benefits and risk consultancy, said that allowing BSPS to continue without a credible sponsor, paying benefits above Pension Protection Fund (PPF) levels, means that sponsors of other pension schemes will essentially be underwriting the risk of the BSPS falling into the PPF at some point in the future.
It also calls for the Pensions Regulator to have a role in allowing trustees to set aside section 67 to enable changes to be made, but subject to a 75% majority vote of the members in favour of the change.
Commenting, Clive Fortes, Partner, said: “We are supportive of enabling employers, trustees and scheme members to find solutions where a viable recovery plan is not possible.
“While we recognise that trustees have a fiduciary duty to look after the interests of scheme members, we support a need for member consent (potentially a 75% majority) for any changes that impact the level of benefits payable. Obtaining a 100% agreement to any changes isn’t feasible, particularly for very large pension schemes.
“Where we do have real concerns is over the proposal to allow the BSPS to be run on as an ongoing scheme (albeit with reduced scheme benefits) without a credible sponsor.
“The effect of this proposal is that the BSPS members will continue to receive benefits in excess of those that would be payable under the PPF with all other scheme sponsors underwriting the non-trivial risk that the BSPS will need to be rescued by the PPF at some stage in future.
“In this case, any gains achieved by the BSPS will be enjoyed by members of the scheme through improved benefits or improved benefit security, while any losses will ultimately be borne by other UK pension scheme sponsors through an increased PPF levy. Unfortunately there can be no outcome where everyone wins.”
“We do not think that it is reasonable to expose other scheme sponsors to the risk of having to underwrite any new scheme through increased PPF levies if the scheme is allowed to run on without a strong scheme sponsor.
“If the Government believes that they have a public interest duty to protect the BSPS, because it is ‘too big to fail’, then it should do so outside the PPF. We do not think that it is reasonable for the Government to impose this burden on other PPF levy payers.”
Calling for the Pensions Regulator to approve any changes to scheme benefits, he added: “We support the ability of employers, trustees and scheme members to agree changes in scheme benefits that would improve the sustainability of the scheme. We agree that for large schemes obtaining individual member consent is not practical, but we do not agree that this means that members should have no role in agreeing any changes. For practical purposes, we propose that any changes should be subject to formal approval by the Pensions Regulator, as well as support from the trustees, and at least 75% of all affected members.”
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