MPs appeal for better pensions payment system

News


26 Jul, 2016

MPs appeal for better pensions payment system

Stronger rules to protect workplace pension holders and to ensure they are paid in full may be needed in light of BHS's failure, MPs have said.

It was "imperative" that the rules ensured bosses could not avoid their responsibilities to pay pensions, they added.

Experts say current policy could be storing up problems for the future.

BHS's pension scheme had a £571m hole when it collapsed, far higher than the retailer's market value.

"It should not be forgotten that these [pension] liabilities are promises of deferred pay to employees," said the Work and Pensions, and Business, Innovations and Skills committees.

"There may be a case for stronger and more proactive regulation,"

However, the committees' report on BHS added that it was important "a balance" was found to enable otherwise viable companies to continue operating.

When BHS fell into administration, its pension scheme automatically fell under the auspices of the Pension Protection Fund (PPF) - the lifeboat for pension schemes.

The PPF ensures people are paid their pension, even when a company goes bust.

To pay for this, compulsory annual levies are charged on all schemes that would be eligible to enter the PPF if needed.

Much debate now surrounds how to keep pension schemes healthy, rather than being a millstone that is ignored or brings businesses down.

The PPF's latest estimate found that 4,995 final salary pension schemes are in deficit, compared with 950 in surplus.

See also - Women behind with their pension pots