The UK Law Commission's review of the issue of pension scheme surplus will cause damage and uncertainty to pension schemes, according to industry experts.
The Treasury has said it will request the Law Commission to consider a law on surplus this autumn. But both the National Association of Pension Funds (NAPF) and the Association of Pension Lawyers (APL) have urged the Law Commission not to go ahead with the review.
APL chairman Robert West said: “There is a concern that even the referral to the Law Commission will create uncertainty among employers and trustees, irrespective of the conclusion that the law commission reaches.
“We do not want to go through a period of further uncertainty, particularly when case law has pretty much answered most of the outstanding questions referring to surplus.”
The APL wants the government to let the findings of the 1993 Goode Committee report to stand. This concluded that surplus should be left up to the rules of each individual pension scheme.
West further stated that he believed it was the minority of pension schemes that had unclear surplus rules that might subsequently generate court action.
J Sainsbury pensions manager Geof Pearson said: “I think it is very dangerous territory, it could do more damage than good.
“If the members think the surplus is theirs, all it has the effect of doing is undermining the employers’ commitment to that scheme, so it is an ephemeral victory.”
Bacon & Woodrow investment practice associate Michael Robarts said: “If anybody owns the surplus it is the trustees and they have a duty to act reasonably to both the beneficiaries and the plan sponsor.”
Robarts proposed an independent assessment of scheme value as a way of working out who owns surplus.
He added: “This is a good moment to be having this debate, as there are not too many contribution holidays taking place at the moment which would otherwise make it emotive.” By David Rowley
The Pensions and Lifetime Savings Association (PLSA) has announced it will shrink its board by more than one-third as part of a governance overhaul to make it "agile and more appropriate".
Smaller FTSE 350 defined benefit (DB) schemes were nearly 15 percentage points less well-funded than larger schemes in 2017, according to a Goldman Sachs Asset Management (GSAM) analysis.
The advent of collective pension systems could help the UK avoid demographic challenges which will make it "impossible" for society to help savers in retirement, experts say.