Is history repeating itself with the Pension Schemes Bill and introduction of new DB funding code?
Jonathan Stapleton says the Pension Schemes Bill is the latest in a long line of well-meaning legislation that makes it more difficult for employers to offer good schemes to their staff
History, we are told, has a habit of repeating itself. When Professional Pensions first launched in September 1995, it came in the wake of the Pensions Act 1995, legislation which had been laid down following the Maxwell scandal and the subsequent publication of Pension Law Reform, the so-called Goode Report.
The Pensions Act 1995 introduced the much-criticised minimum funding requirement (MFR) for schemes as well as establishing the Occupational Pensions Regulatory Authority (OPRA) and introducing additional protection for existing scheme benefits.
Writing it down as I have above sounds all well and good but the MFR, though well intentioned, was widely criticised over the following years as being insufficient to cover the benefits promised for many schemes and something that had increased regulatory costs for sponsoring firms without necessarily reducing risk.
Likewise, the member protections introduced by the same act made what were often discretionary pension increases a guarantee - a move that substantially increased the costs of running defined benefit (DB) schemes and led to many firms closing them in favour of cheaper defined contribution alternatives.
Indeed, the front-page story on our very first edition was about how costs had driven WH Smith to money purchase - one of many firms that made the switch over the following ten years.
Now, as we celebrate our 25th year, we are about to see the Pension Schemes Bill enacted - legislation that follows the BHS pensions scandal and a law that will introduce, among other things, additional protections for members.
It also comes alongside a new DB funding code of practice from The Pensions Regulator, which will introduce more objective funding standards for schemes.
And, while there are many good intentions behind the introduction of the Pension Schemes Bill, it is the latest in a long line of legislation hamstringing the industry and making it ever harder, and ever more expensive, for good employers to offer good pensions to their staff.
Jonathan Stapleton is editor of Professional Pensions
Email him at: [email protected]
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