The Work and Pensions Committee (WPC) has called on the government to consult on giving the regulator new enforcement powers to avoid another British Home Stores (BHS) disaster.
In a report about the governance of defined benefit (DB) schemes, MPs said the Pension Regulator (TPR) should be able to impose more punitive fines on sponsors and be nimbler to intervene more effectively in tricky cases.
The select committee believes these would act as a "nuclear deterrent" to people avoiding their pension responsibilities. Also, to ensure TPR is better equipped to deal with scenarios similar to BHS, which collapsed earlier this year with a big pension deficit.
The report also said trustees should have new powers to take decisions in the interests of members. This could include powers to negotiate restructurings that result in better outcomes for schemes facing crisis than by going into the Pension Protection Fund (PPF). Trustees should also be able to "introduce flexibility to indexation to make schemes more sustainable", and consolidate smaller schemes into a new statutory PPF-managed fund.
MPs are in favour of conditional indexation, whereby indexation can be reduced for a certain period time of time if it is in the best interests of the scheme.
In its forthcoming Green Paper the government should consult on allowing permitting trustees to propose changes to indexation rules in the interest of members, said the committee.
When the report into the retailer was produced in July, it mainly focused on its former owner Sir Philip Green's role but left out broader questions of what extra powers the regulator should have in future.
The report published today argues it should never again take two years for TPR to intervene in a negotiation concluding with a 23-year deficit recovery plan.
It said the timescale for the submission of valuations and recovery plans should be reduced to nine months, although the watchdog should intervene sooner where it has concerns.
Also, the government should consult on rules to make TPR clearance of major corporate transactions mandatory rather than voluntary, said the committee. The regulator has previously said it would like to have more powers to veto merger and acquisitions but only in certain circumstances.
The WPC's chairman, MP Frank Field said: "It is difficult to imagine TPR would still be having to negotiate with Sir Philip Green if he had been facing a bill of £1bn, rather than £350m. He would have sorted the pension scheme long ago.
"The measures we set out in this report are intended to reduce the chance of another scheme going down the BHS route. We hope and expect that we will never again see a company like BHS being able to come up with a 23-year recovery plan for its pension fund, and certainly not that it would take the regulator two years to really begin to do anything about it.
"It will sadly be of no comfort to the 20,000 BHS pensioners facing cuts to their promised pensions, but had just some of these measures been in place they might never have ended up in that situation."
Reacting to the report, TPR's chief executive Lesley Titcomb said: "We welcome the committee's report which recognises the importance of robust and proportionate regulation for workplace DB pension schemes and of ensuring that workplace pension savers and the PPF are well-protected. We note its recommendations and will consider them carefully.
"We continue to discuss options with DWP for the legislative and regulatory framework for workplace pensions, and how this might be improved, ahead of the green paper, which will consider the future of pension funding, the regulatory framework and TPR's powers."
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