Government measures to protect members of defined benefit pension schemes have been branded a ‘damp squib’. 

Secretary of State for Work and Pensions Esther McVey launched a long-awaited White Paper which included robust new measures to deal with those who recklessly endanger pension schemes. The move came after the crisis that engulfed the BHS pension scheme after the business collapsed last year.

The key points from the document are:

• The ability to issue “substantial fines” where corporate transactions have a detrimental impact on pension schemes.

• The Pensions Regulator (TPR) may be handed beefed-up powers to gather information from parties involved in supporting DB schemes.
• It rejects calls for merger & acquisition (M&A) deals to be signed off by The Pensions Regulator.
• Key focus on encouraging small, inefficient DB schemes to merge – but not clear how this can be achieved.

Ms McVey said: “At the heart of the White Paper is a strong message for employers tempted to act in a way that is detrimental to their pension scheme.

“We will not tolerate such behaviour, and will come down heavily on attempts by employers to avoid their responsibilities.

“We are supporting The Pensions Regulator to be a clearer, quicker and tougher organisation by giving it new and improved powers to gather information and require employer co-operation. Where there is evidence of unscrupulous behaviour, we are introducing measures including a punitive fines regime and, in the most serious cases, a new criminal offence for those who deliberately and recklessly put their pension scheme at risk.”

Tom Selby, senior analyst at online pension, investment and stockbroker services provider, AJ Bell, said that despite tough talk the proposals offered little protection.

He said: “The document is filled with suggestions of actions that could be taken to protect savers and prevent another BHS or Carillion-type disaster, but anyone hoping the Government would come down on firms like a tonne of bricks will likely be disappointed.”

He added: “While some will view this consultation as a bit of a damp squib, it is important policymakers get any reforms in this area right. After all, it is not just the futures of 11 million DB members at stake here – millions more work for these companies and could, indirectly, be impacted by any measure which raises short-term costs for their employer.”

Those sentiments were shared by Steve Webb, director of policy at Royal London, who said: “Clamping down on employers who wilfully under-fund 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.”

He added: “All in all, there is little in this paper that offers reassurance that we will not be reading about another Carillion or another BHS in the months and years to come.”