This week the DWP has issued two consultation papers whose outcome potentially could have a significant impact on the regulatory burden upon UK private pension schemes.

First, the 'big picture': the Thornton Review of organisations involved in the regulation and protection of workplace pensions. Paul Thornton, a Managing Director of Gazelle Corporate Finance and a previous President of the Institute of Actuaries, was asked by the DWP on 16 January this year to look at how the functions of The Pensions Regulator, the Pension Protection Fund, and the Financial Services Authority to the extent that it covers work-based pensions, fit with existing Government pensions policy and its reform proposals and wider developments.

The consultation paper sets out the emerging issues and evidence presented so far. Most proposals have been directed at the workings of the regulatory interface between TPR and FSA. The condoc focuses on three particular questions:

• Is there a good case for bringing TPR and PPF closer together?
• Is there a good case for bringing FSA and TPR closer together? and
• Is there a good case for bringing the Pensions Ombudsman and the Financial Ombudsman Service closer together?

Responses are invited by 31 March 2007.

At the other end of the scale, perhaps, the DWP's Deregulatory Review of private pensions regulation aims to ease the burden of red tape for employers who offer workplace pension schemes – while also protecting the interests of pension scheme members. This review, also independent of the DWP, is led by Ed Sweeney, joint deputy general secretary of Amicus, and Chris Lewin, former head of UK pensions at Unilever plc. They were appointed by the DWP on 14 December 2006 to look at more detailed measures to reduce administrative costs and the costs of pension provision. Initial suggestions from key stakeholders have focussed on ways to make defined benefit provision more flexible and less expensive for employers.

The main proposals explored in the condoc are that:

• The regulatory framework should be adjusted to facilitate the creation of risk-sharing schemes to arrest the shift into pure DC arrangements that leave all risks with the employee;
• As part of that adjustment, employers should be offered the opportunity for more flexibility over managing their liabilities going forwards - restrictions on changing normal pension age, limited price indexation and revaluation should be relaxed, with safeguards where appropriate. The permitted changes could perhaps apply not only to new entrants but also apply to future accruals of existing members to encourage employers to persevere with remaining DB schemes;
• At least part of the regulatory framework should be shifted over time to a more light touch, principle-based approach. An early test bed for this approach could be the disclosure regime;
• Consideration should be given to easing the requirements upon trustees; and
• The arrangements on surplus, employer debt and section 67 should be reconsidered to be more sensitive to the wide range of circumstances that can exist.

Interested parties are asked to respond by 6 April 2007. The reviewers will report their findings and recommendations to Ministers in the spring.

The background to both these reviews can be found in the Pensions White Paper Towards a New Pensions System, published in May 2006, and the Summary of responses to that consultation in October 2006. They are included in the DWP's Simplification Plan.

Other news

Stakeholder schemes

Meanwhile, in an announcement via email to the industry, the Pensions Regulator has withdrawn the requirement to submit annual declarations and accompanying documentation for stakeholder schemes. Reporting accountants will still be required to produce the declarations in line with legislation - but will not need to submit them to the regulator.

TPR has found that stakeholder schemes are generally well run and effectively governed. Independent reporting accountant reviews have rarely identified any matters considered to be materially significant or detrimental to members' benefits.

Financial Assistance Scheme update

On 27 February the Government announced it was extending the insolvency deadline to qualify for the Financial Assistance Scheme to 31 August 2007. In a written statement to Parliament, Minister for Pensions Reform James Purnell said:

"I have received representations from trustees of a small number of pension schemes who are in negotiation with employers in relation to insolvency and qualification for the Financial Assistance Scheme that they would like some further time to complete this process."

"I therefore intend to extend the cut-off date for insolvency events to 31 August 2007. I will bring forward appropriate amendments in due course. In the meantime I will not give effect to the current cut-off date [ie 28 February] and I will consider whether any further extension beyond 31 August 2007 may be required."

The Financial Assistance Scheme (FAS) was set up to provide financial assistance to members of qualifying occupational pension schemes which started wind up, under-funded, between 1 January 1997, and 5 April 2005, where the relevant employer is insolvent.