UK - Many trustees are unaware their powers will be weakened "significantly" by new requirements for setting funding rates, an independent trustee firm claims.
Capital Cranfield says the Pensions Bill will require trustees to agree on a statement of funding principles and a funding plan with the sponsoring employer. But experts warn the full implications are not fully understood.
Capital Cranfield chairman Richard Malone said that while the requirement to reach agreement was “sensible”, it would lead to a “significant change in the balance of power” for a large minority of schemes where trustees alone currently set contribution rates.
He said: “The government is effectively overwriting trust deeds but many trustees have not yet picked up on this.
“Some trustees who are currently uncomfortable with the increasing levels of responsibility may be secretly relieved that the employer will become part of the decision making process. But for others, independently setting the funding rate is seen as a critical element of their role.”
Law firm Linklaters agreed. Consultant Richard Kandler said: “While the Bill does not explicitly say this, it is very difficult to escape the conclusion that the balance of power will move away from trustees in some schemes. “There is so much uncertainty around where the funding requirement level will be set, this seems to have gone unnoticed.”
The Bill is also expected to increase “dramatically” the number of referrals to the pensions regulator as trustees and employers seek a mediator where an agreement cannot be reached.
Kandler said: “The regulator will find it has its hands extremely full. It is essential it has sufficient resources to cope.”
Guy Opperman has indicated his support for a fresh pensions commission as the government seeks to understand how to progress pensions policy in a wide range of areas.
Auto-enrolment (AE) minimum contribution rates could rise to 12% by 2030, with a 50/50 split between employer and employee, the Pensions and Lifetime Savings Association (PLSA) says.
ITM director Maurice Titley looks at the next steps schemes should take on GMP equalisation.
Schemes are too focused on outcomes when assessing governance, when this may be a result of circumstance not skill. James Phillips looks at whether governance needs more of a framework.