UK - Independent trustees are stonewalling scheme sponsors over increased employee pension contributions unless any extra payments are ring-fenced.
Trustees are concerned that only deferred and pensioner members will see the benefit of any additional member contributions if a company fails before the Pension Protection Fund comes into force in 2005.
The anomaly under the present wind-up rules were highlighted by Thomas Eggar Trust Services director Vernon Holgate.
He said: “We are aware that a number of employers are proposing an increase in member contributions. Active members, of course, will pay for this.”
But he said that until 2005 when the PPF is expected to come into force, increased contributions provided no enhancement in security or benefit for active members.
“This is inequitable and we will resist such requests unless additional member contributions can be adequately ring-fenced.”
Wragge & Co partner Richard Black said if there was any concern over the strength of the firm going forward trustees must consider their options and act where necessary.
“You have to look at the strength of the employer and take a view whether extra contributions will add value going forward. If trustees have a concern, ring-fencing these contributions isn’t a bad idea.”
Alexander Forbes director of trustees services Andrew Bakewell stressed: “The trustees as part of their general duty of care would have to satisfy themselves as to the employer’s long-term prospects.”
But he warned that trustees could hinder the longevity of a scheme by not sanctioning increases in contributions.
“Increasing employee contributions is one way to ensure the continuation of valuable DB benefits.”
The Pensions and Lifetime Savings Association (PLSA) is in the process of convening an industry-wide group to take forward the work of the Institutional Disclosure Working Group (IDWG).
The Transfers and Re-registration Industry Group (TRIG) has given its support to an initiative which aims to complete occupational pension transfers within three weeks.
Scottish Widows has completed a bulk annuity deal for the Hitachi UK Limited Pension Scheme.