Secretary of State for Work and Pensions Esther McVey said: “At the heart of the paper is a strong message for employers tempted to act in a way that is detrimental to their pension scheme.”
But what exactly do the changes mean for trustees? And how much of an impact will these suggestions really have? Here are eight of the biggest things trustees should know about the consequences of the White Paper.
1. There are fewer changes than expected
In the DWP’s Green Paper published last year, a number of changes were suggested that looked likely to impact the majority of DB schemes. But only a few of these are taking place, according to the White Paper.
For example, the period for completing triennial actuarial valuations will stay at 15 months, and there’ll be no statutory override to allow a change to CPI-based pension increases, for schemes whose rules don’t otherwise permit it.
2. Company directors can now be criminally prosecuted
The Pensions Regulator will now have greater power to take action against company bosses who deliberately put DB schemes at risk.
Directors can now be criminally prosecuted if they are found to have “committed willful or grossly reckless behavior” in relation to a pension scheme. These fines are likely to only apply to a minority of poorly run schemes, though – not the majority.
3. Trustees must appoint a chairman
Under the new guidelines, DB trustees are now required to appoint a chairman.
The chair will need to provide a statement to the regulator alongside the scheme's actuarial valuation every three years. This statement should cover key funding decisions and how trustees are dealing with risk.
4. More clarity for trustees in TPR’s DB funding code
The regulator will revise its DB funding code to make their expectations around scheme funding clearer.
More examples of exactly how this will work should follow from the DWP, but the greater clarity could be good news for trustees.
5. Trustees will be encouraged to think long-term
The White Paper’s changes will encourage trustees to think on a more long-term basis, and set longer-term objectives.
For example, trustees will be urged to clarify whether they’re thinking about buy-out in the future, or if they have other ideas in mind.
6. The ‘notifiable events’ framework may be strengthened
The DWP will carry out a review of the current notifiable events framework, to see whether it covers all relevant transactions.
For example, it will look at whether it’s necessary for sponsoring employers or parent companies to make a ‘statement of intent’ in consultation with trustees, before a transaction takes place.
7. There’s no mention of maximum recovery plan length
The DWP made no mention of its previous suggestions to put in a maximum allowed length of time for deficit recovery plans – which could see some employers breathe a sigh of relief.
8. Benefit consolidations are still under discussion
The White Paper says that the DWP will discuss scheme consolidations later this year. It also set out plans to work with the regulator to raise awareness of the benefits of consolidation.
Written by Nikki Allen
