29 May 2018: The Association of Consulting Actuaries (ACA) has questioned the value of a number of the proposals in the Defined Benefit Pensions White Paper in its evidence to the Work & Pensions Select Committee Inquiry.
In summary, the ACA evidence says:
Regulator effectiveness – we do not believe that substantial new powers are needed for the Pensions Regulator as it already has significant powers, some of which it has used only sparingly; increased resources may allow it to intervene in more schemes, potentially at an earlier stage, but will lead to an increased levy payable by pension schemes; and whilst cultural change is clearly underway within the Pensions Regulator, it will take time to achieve. There is also the risk of powers (and fines) being exercised disproportionately in order to prove that the Pensions Regulator is taking a tougher stance, when a more targeted approach might achieve better outcomes.
- Corporate transactions – overall, we think that the package of measures proposed in the White Paper taken together should provide some improvement where corporate transactions have implications for the security of pensions.
- ‘Wilful and grossly reckless behaviour’ – we do not think that the proposed criminal offence under this heading in relation to a pension scheme is likely to have a significant impact on directors of companies sponsoring pension schemes.
- Scheme funding – reducing the complexity and variety exhibited within the DB scheme universe to single metrics is a noble aim, but the unintended consequences will do more harm than good. The Government’s stance in the Green Paper was that DB funding was broadly functioning well, with some exceptions. Therefore, any measures should be focussed on these exceptions, without de-stabilising a system which is by-and-large working well.
- DB consolidation – we believe that consolidation is most likely to happen if schemes simplify their accrued benefits. Increased requirements for minimum standards of scheme governance could also help to drive consolidation. It will be important for an appropriate regulatory regime to be put in place which creates a level playing field for all types of aggregator vehicle and does not undermine the security of members’ benefits.
- Legislative timetable – we do not believe that it would be appropriate to push for a faster legislative timetable than proposed in the White Paper.
A copy of the ACA evidence is available here
For further comments:
David Everett (Chair, Pension Schemes Committee) 020 7432 6635
Gareth Boyd (PR Committee Chair) 01737 241144
David Robertson (Secretariat) 020 3102 6761 (M: 07919 911380)
About the Association of Consulting Actuaries (ACA)
Members of the ACA provide advice to thousands of pension schemes, including most of the country’s largest schemes. Members of the Association are all qualified actuaries and all actuarial advice given is subject to the Actuaries’ Code. Advice given to clients is independent and impartial. ACA members include the scheme actuaries to schemes covering the majority of members of private sector defined benefit pension schemes. The ACA is the representative body for UK consulting actuaries, whilst the Institute and Faculty of Actuaries is the professional body.
This document is intended to provide general information and guidance only. It does not constitute legal or business advice and should not be relied upon as such. Responding to or acting upon information or guidance in this document does not constitute or imply any client /advisor relationship between the Association of Consulting Actuaries and/or the Association of Consulting Actuaries Limited and any party, nor does the Association accept any liability to any person or organisation relating to the use of such information or guidance.
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