Professional Pensions (11/09/08) reported that, following pressure from the NAPF, the DWP conducted a survey of stakeholders (which excluded the OPA) and is now considering making it easier to return scheme "surpluses" to employers. Why the secrecy over this survey, one asks? What's wrong with open consultation?

However following an application under the Freedom of Information Act to see the discussion paper the OPA was invited to respond by 17/10/08 and has now done so. The response is now available from here.)

The OPA is extremely concerned at this proposal to allow companies to extract apparent "surpluses" from pension funds. Such surpluses can be transient – here one day and gone the next, as this year’s market turbulence has shown. Also, surpluses/deficits are calculable in several different ways.

Conflicts of Interest are also a key issue here as, in most schemes, trustee boards are dominated by employer appointees. (See 50% MNTs)

At least one of our members' schemes is significantly in surplus, but no increases are being currently paid to pensions (increases in this scheme are discretionary). It would be completely unacceptable for members if this surplus, for example, were allowed to be paid back to the employer.

It is possible that, in rare cases, a case may be made for a partial return of surplus, but very strict prescriptive legislation would be required to justify this event.
 

Déjà Vu !

From 1989 to 1998 regulations allowed many employers to extract "surpluses" from pension schemes by means of "pension holidays". These amounted in many cases to about 20% of the fund values at that time.

From 1999 to 2002 the values of the scheme funds fell by about 20% due to the "bear market"!

Is the government going to allow this to happen all over again?