UK/US - Plans for a compulsory central insurance fund to protect final salary scheme members could be unveiled in the next few weeks, IPN's sister publication, Professional Pensions, can reveal.
Sources close to the department of work and pensions say the fund – which was mooted in the pensions Green Paper – will mirror the US Pension Benefit Guaranty Corporation.
Its revenues come from premiums paid by pension plans, investment income and recoveries from employers responsible for terminated underfunded defined benefit schemes. The basic flat-rate premium is currently US$19 per member a year.
Sources say the UK fund will be compulsory with penalties on severely underfunded schemes to ensure firms do not try to exploit the system by running their plans “on the cheap”.
But the move was attacked by the Federation of Small Business national pensions spokesman Terrance O’Halloran who accused the government of penalising firms for the fate of the stock market.
He said: “The government must stop knee-jerking to every twist and turn of the market and fate.
“We are over-regulated and over-nannied, and the government is looking for everybody to pay into a huge pot to rescue somebody else in case they get into difficulty. There has got to be a boundary beyond which we will not go – this is one of them.”
There are also fears the plans will dash industry hopes of scrapping minimum funding requirements.
Hymans Robertson senior partner Ronnie Bowie explained: “Schemes will have to be insured to some level. If that is 90%, then the question is 90% of what?
“This means we’ll have the MFR by another name.”
But experts say no fund can be launched until the government decides on:
- A common minimum funding standard for schemes to help set premiums.- Whether the fund will have financial backing from the government.
A government source said: “Both issues have been actively discussed by the DWP, No. 10 and obviously No. 11.”
But she added: “Nothing has been decided on either of them, which worries me because they want to introduce the scheme in the next few weeks.”
PwC, KPMG, EY and Deloitte must break up their consultancy and audit businesses into distinct firms to provide greater focus on the "most challenging and objective audits", the competition watchdog has said.
The Department for Work and Pensions (DWP) has released its first batch of guidance setting out how the guaranteed minimum pension (GMP) conversion legislation may be used to resolve unequal payments.
This week's top stories include the government spending £800,000 on a Gogglebox advert and MPs writing to The Pensions Regulator about its engagement with the Railways Pension Scheme.