Defined benefit schemes have been in the news a lot in recent years, with schemes such as BHS, Toys 'R' Us and Carillion accused of putting their employees' retirement savings at risk. In response, the government has published a white paper with plans to strengthen defined benefit schemes. But do the proposals go far enough?
Yes says Chief Executive of The Pensions Regulator, Lesley Titcomb, who has welcomed the proposals put forward.
She said: "We will now work closely with government to develop the white paper’s proposals, including fines and criminal sanctions, to ensure they are proportionate, act as an effective deterrent and work in practice. The best support for a DB scheme is a strong employer and we believe the current flexible funding framework, which allows employers to balance growth with meeting pension benefits, remains the right approach and we will aim to retain this flexibility in any new approach."
However, the former pensions minister Sir Steve Webb said that the proposals may not go far enough and that they risk being "gesture legislation".
Web said: "Helping small pension schemes to consolidate into larger schemes could be helpful, but legislation appears to be years away. With an act of parliament likely to have to wait until 2019/20 and further detailed regulations needed after that, it could be a long time before today’s paper has any practical impact"
He added: "Clamping down on employers who wilfully underfund their pension schemes will obviously be a popular measure. But proving that someone has wilfully or recklessly failed to fund their company pension is likely to be extremely difficult, and company bosses are likely to have good lawyers. There is a risk that this is simply "gesture legislation" which will never be used in practice."
Details of the proposals can be found here