Experts support company pension breaks if fund is in surplus

Experts have backed employers taking ‘pension holidays’ in the wake of Royal Dutch Shell’s controversial decision to stop paying into its fund.

The oil giant announced last week that it would not be paying into its pension fund for a temporary, unspecified period, saying it was “heavily in surplus”.

Pension holidays in the 1980s have been blamed, in part, for the funding crisis that has seen many schemes close in recent years. However, Paul McGlone, principal and actuary at business services firm Aon Consulting, said companies should gratefully accept the chance to stop pension payments.

He told Personnel Today: “Employers should grab the chance to take pension holidays as soon as they can. It is easy to pay money in to pension funds and much harder to get it out. Firms should use the money to grow the business and not have it tied up in a way that they can’t use it.”

McGlone said that pension regulations were tighter than they used to be, with trustees and the Pensions Regulator having the power to enforce pension fund payments.

He added that, with many organisations reducing their obligations by closing schemes to new members, the risks were lower.

A report in August by actuary firm Lane Clark & Peacock showed FTSE 100 firms with an aggregate pension funding surplus for the first time in five years.

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