Pension watchdogs ordered companies to be much more open yesterday if they believe there could be problems meeting pension promises made to staff. The Pensions Regulator also warned that employers could be forced to top up their pension schemes if there was any danger of employees losing out.
The regulator, set up this year to police occupational pension schemes, said companies would have to give it early notice of problems that could eventually lead to staff suffering. Pension scheme trustees will also be covered by the new rules on "notifiable events".
The Pensions Regulator published a list of 11 such events that could jeopardise pensions of employees in final salary occupational schemes. In each case, employers must notify the regulator "as soon as is practically possible", if such an event occurs.
Most of the situations covered by the new code of practice are circumstances that might suggest a company is heading towards insolvency. Companies will have to inform the regulator, for example, if their credit rating changes or they default on a debt.
The regulator must also be informed if company officials are convicted of dishonesty offences. In addition, pension schemes will have to notify the regulator if they increase benefits or make unusually large payments out of the scheme, unless employers have provided additional funding to cover such expenses.
The Pensions Regulator administers the Pension Protection Fund, the lifeboat scheme that pays out to members of pension schemes if an employer goes bust and there is insufficient cash to pay benefits. As such, it has powers to force employers to take action if it looks as if there might otherwise be a call on the fund.
Although the regulator cannot force employers to take action that might force them into insolvency, it can require funding top-ups.The regulator can also step in if companies attempt to default on pension promises through corporate restructuring.
Justin Wray, a director of the Pensions Regulator, said: "We are expected to be more proactive than previous regulators and we see this framework as being entirely consistent with that approach."
Ros Altmann, an independent adviser on pensions who has campaigned for better regulation, said that she welcomed the new rules. Ms Altmann said: "Someone should be keeping track of what's happening at a company that has made pension promises to staff, particularly where it has asked employees to make payments of their own to help fund such promises".Reuse content