UK - Government amendments to priority orders on scheme wind-ups have been dismissed as "less than a temporary fix" by consultants.
They say the amendments – which were laid before Parliament on Monday – fail to stem the problem of active and deferred members’ benefits being overlooked until payments to pensioners have been settled.
Under the new rules – due to come into force in 2007 – contracted-out rights for non-pensioners no longer receive a high priority. But the department for work and pensions’ proposals fail to increase the priority order for members on the brink of retirement.
Hymans Robertson head of actuarial practice Ross Russell said the changes amounted to little more than tinkering and would have a negligible benefit.
He said: “These amendments are just a stop-gap. They do not avoid the cliff edge for older non-pensioners, but they do redistribute the rubble at the foot of the cliff.”
Consultants said the Occupational Pension Schemes (Winding-Up) (Amendment) Regulations 2004 did not to take into account the separate priority order under the Pension Protection Fund. And they said it would be a nonsense if, in the long-term, the wind-up priority order was different from the rules governing PPF benefits.
Hewitt Bacon & Woodrow associate Raj Mody said: “These winding-up regulations are all about how you share the pain, but the intention of the PPF is that there will be limited pain in future as it will step in, to some extent, to top-up benefits.
“So in what circumstances are these rules going to operate? And where then does the winding-up priority come in if the PPF is going to step in anyway?”
Russell agreed. “The government is between a rock and a hard place: they can’t align with the PPF rules because they haven’t got them yet; and yet they have got to do something.”
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