UK pensions 'creaking at the seams'
A leading pensions expert has questioned how adequately occupational pension schemes are being managed after the Pensions Regulator and Pension Protection Fund gave evidence to the Department of Work and Pensions Committee in the wake of the BHS collapse.
Lesley Titcomb, chief executive at the Pensions Regulator, claimed that she only found out that BHS had been sold when it was reported in the press last year.
The struggling high street store was sold by the Arcadia boss, Sir Philip Green, to a company called Retail Acquisitions in March last year for £1. The retail tycoon is expected to be grilled on the sale by the DWP committee next month.
The DWP was also advised that the BHS pension scheme had a staggering 23-year deficit reduction plan. Alan Rubenstein, chief executive of the Pension Protection Fund told the group of MPs that this was well up on the average nine-year recovery plan.
Tom McPhail, head of retirement policy at Hargreaves Lansdown says: “The UK’s occupational scheme provision is creaking at the seams. Whilst some schemes are extremely well run, there are also many small, inefficient, cottage industry pension schemes. Pension investors, whether in final salary schemes or money purchase arrangements, have a right to expect their retirement savings to be protected by professional managers operating to high regulatory standards.”
The BHS pension scheme has a deficit of £571m and following further investigations, the PPF is expected to take responsibility for payments to scheme members.
The PPF protects final salary scheme members if their employer goes bust and is funded by a levy on schemes.
Retirees that have passed their scheme’s normal retirement age get 100% of their existing pension while the remainder get 90% capped at £33,678.38.
Separately, Frank Field, MP for Birkenhead and chair of the work and pensions committee has written to Chancellor George Osborne requesting a Pensions Bill in the next Queen’s speech to improve the regulation of schemes.
Mr McPhail adds: “A Pensions Bill in the Queen’s speech would present an opportunity to bring the UK’s pensions into the 21st century, raising standards, putting pressure on schemes to consolidate, to become more efficient and to put the members at the heart of the pension system.”
“Without such reforms, it may be impossible to reconcile the tensions between the interests of British industry to go about its business on the one hand, and on the other the need for employees’ retirement savings to be adequately governed and protected.”