UK - The Confederation of British Industries (CBI) has called for an eight point action plan to be implemented in a bid to protect struggling firms from being damaged further by defined benefit pension schemes.
It said this would allow companies to fill any deficit over a longer timeframe - meaning they could use a greater share of cashflow for maintaining jobs and investment during the recession.
And it called for a move to longer-term accounting valuations to better reflect the underlying position of pension funds - a move it said would alleviate pressure on firms to divert cash from fighting the recession into trying to fill a pensions deficit.
CBI deputy director-general John Cridland said: "Even when the economy was strong, longer lives and the loss of key tax incentives had made final salary pensions very expensive.
"Firms who are fighting to preserve final salary pensions find themselves punished by regulation and much worse off than firms who offer no pension at all. We cannot allow sound businesses to be dragged down by these pensions, particularly during a recession.
He added: "We need much clearer signs of support from the government, who hit these pensions again in the last Budget, and from the Pensions Regulator. Longer recovery periods will help firms keep their commitment to pensions without forcing them to divert critical cashflow.
"The Pensions Regulatory needs to send a clear signal to trustees by investigating recovery plans longer than 15 years, instead of using the current ten year trigger.
"Businesses are badly winded by the recession and, when it comes to their long-term pensions issues, they need a bit more time to catch their breath. We cannot rule out large scale closures of these schemes in the longer term, but these short term measures will help."
CBI pensions panel chairwoman and National Grid global head of retirement plans Tilly Ross said: "To enable companies to continue to provide good pensions and remain competitive we need immediate and decisive action.
"Adapting pension law to help firms restructure in the recession is a key part of this. Section 75 reforms can be achieved at no loss to members, but will make business more competitive."
The CBI pensions action plan in full:
1. The regulatory framework must be adapted to place the long-term above the short-term. On a temporary basis, the Pensions Regulator should investigate recovery plans longer than 15 years, rather than the current ten year trigger. It should also delay proposals for a more stringent approach to mortality until after the recession.
2. The marked-to-market approach of valuing pensions liabilities has proved ineffective over the past year. Accounting valuations must be adapted to allow like-for-like comparison of scheme positions and to avoid the worst misrepresentations of the scheme's position on a spot-value basis.
3. Government should press ahead with changes that make it more possible for schemes to adapt to changing circumstances - for instance by making it easier to change the retirement age as people live longer and seeding a market for products that help firms manage their liabilities, such as longevity bonds.
4. As budgetary circumstances permit, the government must move to re-establish some of the advantages to offering defined benefit pension provision that it has eroded.
5. The Treasury should reconsider its proposal to tax employers' pension contributions as part of its reform of tax relief for pensions. This could leave the door open to the reform being extended in the future to pensions contributions of those down the pay scale .
6. Companies should not have their ability to manage their business restricted by poorly-drafted pensions law. The government must reform Section 75 rules for restructuring in group schemes.
7. The Pension Protection Fund already costs well over double the level anticipated in 2004 and business cannot afford to pay more during the recession. The PPF board should stick to the three-year indexed cap and extend it. If further increases in funding are required during this period, the alternative fundraising options in the 2004 Pensions Act should be explored.
8. The PPF was not designed to deal with catastrophe risk. In the interests of reassuring members of schemes, and businesses who pay the levy, government should offer an in extremis guarantee to the PPF.
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