UK - Full buyout costs will be imposed on insolvent companies that wind up their underfunded defined benefit schemes under draft regulations from the government.
Solvent employers have been required to pay full buyout costs if they want to wind up their DB schemes since June 11 last year.
However, under draft department for work and pensions regulations, full buyout costs will now apply where a scheme is in wind-up and the sponsoring employer - or last remaining employer - is insolvent. Insolvent employers that are part of multi-employer sch-emes will also be subjected to full buyout costs.
Additionally, the Occupational Pension Schemes (Transfer Values) Regulations 1996 have been amended, so that trustees have to advise members to seek independent financial advice when they request a transfer value while their scheme is winding up and the sponsoring employer is solvent.
The Confederation of British Industryís senior pensions policy adviser Jay Sheth said: “While the emphasis in the Pensions Bill has been on strengthening member security, which we welcome, there should be a parallel emphasis on ensuring that the environment for firms that do provide occupational schemes is made as attractive as possible.”
Thomas Eggar director Vernon Holgate said that the regulations did little to increase member security when compared to the advent of the Pension Protection Fund.
And Sackers partner Claire Carey said: “The new legislation will increase the size of the debt owed by an insolvent employer to a scheme, but it will not increase its priority over other creditors.”
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Work and pensions secretary Alan Johnson says the change will encourage more scheme members to have a direct involvement with the running of their scheme. The current regulations state that at least one third of trustees are member nominated.
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