The Pensions Regulator (TPR) will be given the power to issue punitive fines to companies that deliberately put defined benefit (DB) pension schemes at risk, the government confirmed today.
Its white paper also outlines how legislation will be introduced to ensure company directors that have "committed wilful or grossly reckless behaviour" in relation to a pension scheme are criminally prosecuted.
Funding standards will be enforced through a revised code, focused on prudence when assessing liabilities, appropriate factors for recovery plans, and ensuring a long-term view when setting the funding objective.
In addition, trustees will be required to appoint a chairman and issue a chair's statement to the regulator with schemes' triennial valuations.
"Improvements to scheme funding, information-gathering and anti-avoidance powers will enable us to be tougher where a scheme is not getting the funding it needs," TPR chief executive, Lesley Titcomb, said
This follows a consultation into the security and sustainability of DB pensions last year, with scheme members, sponsoring employers, trustees and pension professionals all contributing.
It was determined that small and medium-sized schemes are more likely to fail to meet standards expected by TPR, with consolidation highlighted as a potentially more affordable option for many than insured buyouts.
As a result, the government will consult on a legislative framework for new consolidation vehicles to operate, and explore how an accreditation regime could build confidence in consolidation.
It will also work with the regulator to raise awareness of the benefits of consolidation among trustees and employers, and consider minor changes to guaranteed minimum pensions conversion legislation.
However, law firm Pinsent Masons' pensions partner, Alastair Meeks, highlighted how the government paper abandoned talk of replacing RPI with CPI for indexing benefits, along with mandatory clearance.
"This paper is notable for the things that it isn't doing rather than the things it is," he said. "What we have is a bundle of small-scale measures we doubt will make much difference in practice.
"Under its breath, the government seems to be acknowledging that the current regime strikes a reasonable balance between protection of benefits and commercial enterprise.
"It's just a shame that it couldn't make much more of that in the white paper."
