300 'risky' pension schemes under scrutiny

Up to 300 pension schemes will be closely monitored because of the high level of risk they represent - with some in danger of collapsing, the Pensions Regulator said today.

The regulator said it would be closely monitoring between 150 and 300 pension schemes because they were either seriously underfunded or had a large number of members, adding that it would intervene if necessary.

The group also warned that many pension scheme trustees lacked the necessary knowledge and training to carry out their role, saying it had received more than 400 reports from whistleblowers that their schemes were badly run.

It said around 450 companies breached basic governance rules last year, with many trustees lacking basic investment knowledge and the inability to understand advice given to them by professional advisers.

In a report published a year after it received its powers, the regulator said: "Our experience is that the standard of governance of many schemes, particularly smaller ones, is poor.

"Our research shows clear evidence of low standards of trustee knowledge and understanding, particularly at schemes with under 1,000 members."

It said previous research had found that across all schemes more than half of trustees had been given less than three days training for their role.

It added that there were also problems where trustees had a conflict of interest, particularly at pension schemes that faced funding difficulties.

The Pensions Regulator said another priority during the coming three years was strengthening the funding of defined benefit schemes, which include final salary pensions, many of which face large deficits.

It said it wanted to ensure that trustees, employers and their advisers developed a sound understanding about how they should set and agree the statutory funding objective and any recovery plan.

It added that it would intervene if it thought provisions had been set too low, or the duration of the recovery plan was too long, creating a risk both to members' pensions and the Pension Protection Fund, which acts as a safety net if a company goes bankrupt with an underfunded scheme.

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