Pensions regulator tells trustees to curb employers dumping their pension scheme


Pension scheme trustees have been told by the regulator to crack down on employers trying to dump their pension schemes.


Tony Hobman, chief executive of the Pensions Regulator, said the occupational pension watchdog was worried new ways of managing pension funds could lead to employers abandoning their pension schemes.


Speaking today, Hobman warned the occupation pension watchdog viewed transfers of pension schemes to new vehicles as possibly resulting in employers abandoning schemes without fully meeting their obligations to members.


He said: “Trustees should apply a high level of scrutiny to any such transactions which are brought to them.


“They must presume from the start that it is unlikely to be in the best interests of their members to break the link with an employer of substance, except by paying the cost of buying out the benefits with a regulated insurance company.


“Once the link to any employer is removed the trustees will have lost an important backstop to protect scheme members if the pension fund runs into difficulties in the future.”


Hobman added while the regulator welcomed innovation in the way pension schemes are managed he believed the best way to deliver benefits to members was normally for schemes to have the continued support of a viable employer.


The regulator is now planning to consult on this issue by the early part of 2007.


It will also consult on new guidance to help scheme trustees weigh up the proper value of the support given to a fund by an ongoing employer, when considering corporate transactions which would remove that support.


Alongside Hobman’s speech to pension experts a statement on the abandonment of pension liabilities was also issued today by chairman of the Pensions Regulator, David Norgrove.


 

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