UK - Scheme members could still lose all their retirement savings even when the Pension Protection Fund is introduced, the pensions advisory service warns.
OPAS chief executive Malcolm McLean claims a “loophole” in the government’s proposals will allow solvent firms to wind up schemes without paying off the deficit.
He says such wind-ups will be able to go ahead if the scheme’s sponsoring employer and trustees agree the firm does not have sufficient funds to clear the deficit and any attempt to do so puts the company at risk.
Under these circumstances, firms would not even have to meet the minimum funding requirement.
If the firm subsequently failed, the PPF would offer no protection to members because the employer was solvent at the time of wind-up.
McLean said: “There is a huge black hole here and members are going to fall into it.“
“It completely blows out of the water what the government is trying to do to restore confidence in pensions and force employers to act more responsibly.”
PricewaterhouseCoopers partner John Shuttleworth said it was up to trustees to prevent the practice.
“There have been cases where trustees and the employer have ‘compromised’ the debt in this way. “
“Trustees should remember that if they don’t do their job, which is to serve the best interests of members, they will be sued.”
Department for work and pensions spokesman Stuart Todd conceded there was a loophole.
But he added: “If members feel a decision made by the trustee is unfair, they should contact the Occupational Pensions Regulatory Authority, which can bring in an independent trustee.”
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