To the general relief of the whole industry, the Government last week decided to abolish the MFR *. Furthermore, the package of 'interim changes' to the MFR proposed by the Actuaries [PDF] has also been rejected. Accepting too the criticisms which were made of the alternatives put forward in the Consultation Paper [PDF] - a central discontinuance fund, commercial insurance against employer insolvency, compulsory mutual insurance, prudential supervision by a regulator and a common funding standard - the Government drew back from either doing nothing or ordering more consultation, as many had feared would be the outcome.

Instead, in a politically astute move, the Government has plumped for the approach favoured by the NAPF, namely a long-term scheme-specific funding standard (to be expressed in a 'Funding Statement'). The key idea is to ensure that each defined benefit scheme is funded to meet the benefits in full in the long-term. This was also thought more appropriate by Mr Myners, whose advocacy of a stronger regime of transparency and disclosure is echoed in the Government's proposals.

We are also promised - when the Parliamentary timetable has space for the necessary primary legislation - a statutory duty of care on the scheme actuary, directly to the scheme members; stricter conditions about voluntary wind-up than at present; an extension to the fraud compensation scheme; and an obligation upon the employer to return an inadequately funded scheme to full funding within 3 years, with Opra monitoring the recovery plan. The Government will also consider further whether pension benefits might be given a higher priority on employer insolvency (probably they won't be, as this could reduce the success of claims from the Inland Revenue and Customs & Excise).

The general idea is to bind employers more tightly to delivering the benefits promised by the defined benefit pension schemes they sponsor. If effective, this should result in scheme members being better informed about exactly where they stand as to the security of their benefits. There is a cost attached, which will hit smaller schemes harder. Insofar as the problem of underfunding is real, it exists very largely in this sector anyway; the new rules might cause employers sponsoring smaller schemes to decide that the money purchase route makes more sense in future.

One important question left unaddressed is from precisely what date the MFR will cease to be relevant. Opra may already have the authority to consign the MFR to history, without any need to wait for new legislation. Given the widespread agreement that the MFR has been an unmitigated disaster for nearly everyone, the Government must be pressed to declare the MFR dead and buried immediately.