Home > News > 1999 > August 1999 > Consultation Document - Strengthening the Pensions Framework
Consultation Document - Strengthening the Pensions Framework
Jon Bridger - February 1999.For further information, please contact Jon Bridger at the Cheltenham office.
1. Removal of GMPs
Government Proposal
The DSS is seeking to establish whether schemes would welcome an option which would enable them to convert GMPs to an actuarial equivalent which provides full protection for members. The intention would be that the Scheme Actuary would certify that no members would be worse off as a result of abolishing GMPs. In addition, this decision will be limited to the scheme as a whole and not be available on an individual basis.
Barnett Waddingham Response
This is obviously an attractive idea as GMPs do, in most cases, make occupational pension schemes incredibly complicated. However, it is difficult to see how it would work in practice without the employer throwing money at the problem. Ensuring that all members are no worse off in absolutely every possible set of circumstances in the future could prove very expensive.
Therefore, probably in line with everyone else, we have agreed in principle to the Government's proposal but wait to see the detailed requirements. We have also enquired whether the re-introduction of state scheme premiums (i.e. the ability to "buy-back" GMP benefits into the State Scheme) could offer occupational pension schemes an alternative way of removing GMPs.
2. Member-Nominated Trustees
Government Proposal
The DSS have proposed that all schemes should have Member- Nominated
Trustees including provisions for pensioner
trustees in certain circumstances. In particular, the DSS want to remove the employer "opt-out" facility.
Barnett Waddingham Response
The DSS have commented that "the current system is failing to deliver the intended level of member representation" but we would dispute this. We understand that a significant number of employers opted out (after having consulted the membership) in order to retain their existing arrangements which, in many cases, included greater member representation than those laid down by the Pensions Act.
We believe that greater emphasis should be placed on trustee training (for all trustees) and communication with members, as opposed to ensuring that various parties are "represented" on trustee boards. In any event trust law requires trustees to act in the best interests of all members and not in the interests of a particular "constituency" whether that is a particular group of members or the Employer.
Therefore, whilst we would welcome any initiative to clarify and simplify the current regulations, we think the existing framework should be allowed to continue unchanged. Any major changes will simply add to the compliance burden for trustees and employers in the short term.
3. Enhancing the Role of OPRA
Government Proposal
The DSS have proposed that, except in extreme cases, the late payment of contributions and failure to complete audited accounts should be treated as civil offences rather than criminal offences. The intention is that
OPRA will find it easier to take action on a civil basis rather than a criminal basis.>
Barnett Waddingham Response
Barnett Waddingham agree with these proposals although, as is currently the case, we would look to OPRA to provide additional "whistle-blowing" guidance to clarify the circumstances in which OPRA believe a report would be required.
4. Ethical Investment
Government Proposal
The DSS have proposed that
trustees should set out in the Statement of Investment Principles whether they take into account any considerations other than financial considerations and, if so, what these are and how investment decisions are affected.
Barnett Waddingham Response
Although the wording above does not specifically refer to ethical investment, it is mentioned elsewhere in the Consultation Document and the DSS clearly had ethical investment in mind when putting forward this proposal.
Barnett Waddingham have agreed with this proposal provided it is made clear that it is left entirely up to the trustees to decide whether to include any such comment in their Statement of Investment Principles. There will, of course, be some groups of trustees who, after having given due consideration to their general responsibilities under trust law, conclude that such a statement is appropriate. However, we would not want to impose this on all groups of trustees.
Jon Bridger - February 1999. For further information, please contact Jon Bridger at the Cheltenham office.