Pension reform lacks cutting edge: New rights for people in company schemes may have little effect, says Andrew Bibby

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The Independent Online
EMPLOYEES in occupational pension schemes will be entitled to more information when new regulations come into force tomorrow. However, these new rights are limited and may be hard to enforce.

In future, individuals will be able to demand basic details on their scheme at least once a year, rather than only every three years as before. New time limits have also been introduced for other existing rights. For example, pension schemes will now have to respond to transfer value requests from employees within two months, instead of 'as soon as practicable'.

Trustees will also have to tell their members about the existence of the Occupational Pensions Advisory Service and the Pensions Ombudsman.

A recurring problem during the recession has been the realisation by some companies, particularly smaller ones, that they can improve their cash- flow position by delaying pension payments. In some cases, contributions taken from employees' pay-packets have not been transferred to the occupational scheme. Under the reforms, trustees must inform fund members when employers are more than three months late in paying over their deducted contributions.

'This is probably one of the more valuable elements of the regulations,' said Bryn Davies, of Union Pension Services, adding that it may encourage trustees to be more vigilant and to meet more frequently. But he is less enthusiastic about the overall effect of the new measures. 'I suppose one should be grateful for small mercies. But the whole problem with the disclosure regulations is the lack of any real method of enforcement.'

This is also the view of Fergus Whitty, legal officer with the Transport and General Workers Union. 'The right to the information is there, but the right to enforcement is missing. Where do you go? If you go running to the High Court, it's a matter of years before you get a hearing.'

Furthermore, the new three-month rule on payments does not extend to the employer's share of the pension contributions. So it may still be difficult for individuals to discover whether their company is late in paying across its agreed share of the pension costs or if it is taking a contributions 'holiday'. Actuarial valuations of a fund's assets (which could reveal malpractices) are only required every few years, and even with the new rules, trustees have a further two years before the actuary's report has to be made available. 'I can't see why a six-month limit wouldn't be sufficient,' said Mr Davies.

Paul Stannard, of City solicitors Travers Smith Braithwaite, is also sceptical, believing that the changes won't have much effect on either well- managed or poorly administered schemes. 'There is an awful lot more that could be done,' he says.

One reason for the apparent timidity of some of the new regulations is that they stem from a review undertaken by the Occupational Pensions Board in 1988/9 - before Maxwell. Now another attempt is being made to get pensions law right. The Pension Law Review Committee, chaired by Professor Roy Goode, issued its initial consultative document earlier this month, inviting comments from the pensions industry and the public. After the committee's report next year, more radical changes may be proposed. In the meantime, perhaps even small improvements are to be welcomed.

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