Government proposals for company pension reform face fresh obstacles

The Government's long-awaited blueprint for what will replace the minimum funding requirement (MFR) for company pension schemes is unlikely to be published this autumn, the time it was due to become public.

The green paper has been delayed because the Government does not want to pick up the recommendations for change suggested by Alan Pickering, the former chairman of the National Association of Pension Funds who was asked by ministers to identify ways to halt Britain's pensions underfunding crisis.

The document has also been set back by disagreements between rival government departments. The Inland Revenue, which is completing a review of the tax system governing pensions, has been battling to have its views reflected prominently in the forthcoming green paper and in the process has clashed with the Department for Work and Pensions and the Treasury.

A spokesperson for the DWP said ministers still aimed to publish the green paper this autumn, but added there was "no fixed date".

A senior actuary whose firm deals with company pension schemes said: "The Government was going to put all the different strands – including Pickering and the Inland Revenue simplification of tax – into a document this autumn. That looks increasingly unlikely to happen."

As insurers and actuaries await the proposals for what will replace the MFR, concern is growing that the alternative will create a conflict of interest between companies' directors and their pension fund trustees.

Under the current MFR system, the amount of money companies have to inject into defined benefit pension schemes is largely dictated by an actuarial calculation based on the liabilities of the fund.

The replacement of the MFR – which will not be implemented until next year at the earliest – will involve looking at each scheme individually and deciding on a level of funding.

This system is designed to take into account factors such as if the company is financially strong, and will make the level of funding far more discretionary.

Critics say despite the fact that deficits are growing in company pensions, businesses will use the change in funding requirements to pressurise trustees into not insisting investment in pension schemes is increased.

One actuary said: "Often the actuary to the pension fund is also the company actuary. In the future they may have to be different, because the trustees are likely to want to make contributions high to cover themselves, while companies are going to be motivated to keep them to a minimum. We have yet to see how the Government will deal with this."