Department for Work & Pensions. Security and Sustainability in Defined Benefit Pension Schemes. Response from The Pensions Management Institute

Transcription

1 Department for Work & Pensions Security and Sustainability in Defined Benefit Pension Schemes Response from The Pensions Management Institute

2 - 2 - Response from the Pensions Management Institute to DWP consultation Security and Sustainability in Defined Benefit Pension Schemes Introduction PMI is the professional body which supports and develops those who work in the pensions industry. PMI offers a range of qualifications designed to meet the requirements of those who manage workplace pension schemes or who provide professional services to them. Our members (currently some 6,000) include pensions managers, lawyers, actuaries, consultants, administrators and others. Their experience is therefore wide ranging and has contributed to the thinking expressed in this response. Due to the wide range of professional disciplines represented, our members represent a cross-section of the pensions industry as a whole. PMI is focused on supporting its members to enable them to perform their jobs to the highest professional standards, and thereby benefit members of retirement benefit arrangements for which they are responsible. In preparing our response to this consultation, we conducted a formal survey of our membership. Our survey focused on those aspects of the consultation most likely to stimulate debate among pensions professionals: The proposal that accrued rights be subject to reduction Possible changes to revaluation and / or indexation Consolidation of defined benefit pension schemes We issued the survey on 13 March and it ran until 31 March. It received 235 replies. We have incorporated the results of this survey in relevant responses to the consultation. Wherever possible, survey questions have mirrored exactly questions from the original consultation. However, a degree of adaptation has been necessary in order to accommodate the survey format.

3 - 3 - Question 1 Are the current valuation measures the right ones for the purposes for which they are used? a) Are the flexibilities in setting the Statutory Funding Objective discount rate being used appropriately? If not, why, and in which way are they not being used appropriately? What evidence is there to support this view? How could sponsors and trustees be better encouraged to use them? Setting an appropriate discount rate can be a difficult challenge which requires the Trustee to agree with the sponsor on advice from the Scheme Actuary what is an appropriate prudent assumption in the context of expected future returns on a scheme s assets and in the context of the covenant provided by the scheme s sponsors. We are however satisfied that the available flexibilities in setting the rate are being used appropriately. b) Should we consider shorter valuation cycles for high risk schemes, and longer cycles for those that present a lower risk? What should constitute a high or low risk? Or should a risk based reporting and monitoring regime be considered? Shorter valuation cycles would be appropriate for schemes whose funding issues have resulted in the intervention of the Regulator. A high risk scheme would be one where funding has fallen below a given threshold or where significant concerns have emerged concerning the strength of the employer covenant. However, this has to be within a framework that avoids a perpetual valuation discussion which may be counter-productive if this results in a series of short-term fixes, or is reactive to changing market conditions without ever resolving the underlying funding issues. In other cases, we can see an evolution of the current valuation process, for example where there is a well-formulated journey plan addressing contribution and investment strategy. However, we believe that the discipline of a regular valuation process will remain useful, especially as several constituent parts (eg mortality, cashflow updates due to an evolving membership profile) will require a regular review c) Should the time available to complete valuations be reduced from 15 months? What would be an appropriate length of time to allow? Given the advances in technology that have been achieved in recent years, it seems reasonable to expect that a valuation should be completed in under 15 months. In many cases, modern tools would allow constructive discussions based on rolled forward results in advance of formal valuation calculations. We would suggest that in the absence of any particular problems an interval of nine months should be appropriate. However, trustees should be permitted a longer period with the Regulator when obstacles become known provided that these are brought to the Regulator s attention in a timely fashion.

4 - 4 - d) Should other measures or valuation approaches, for example stochastic modelling, be mandated or encouraged? If so, which ones and for what purpose? How would the information provided to the Regulator to explain the agreed recovery plan differ from that at present? What would the costs be, and would they outweigh the benefits? Stochastic modelling can be a useful tool for trustees. However, we do not believe that it is necessary for it to become mandatory. In particular, in some circumstances it may be unsuitable (for example, where other risks such as mortality are more significant than investment risk) or there may be better tools, for example scenario testing.

5 - 5 - Question 2 Do members need to understand the funding position of their scheme, and if so what information would be helpful? a) Should schemes do more to keep their members informed about the funding position of their schemes? Experience has shown that members generally take little interest in scheme communications unless the scheme in question is in crisis. Whilst this is not ideal, it does suggest that attempts to provide more detailed information about a scheme s funding position will not in themselves result in a better-informed membership.. In addition, it is of more relevance to members to understand the benefits they are likely to receive, for which the current funding position and current solvency position will often be poor indicators. b) Do we need Government communications to provide information to the wider public and media about the degree of certainty and risk in the regime? What difference could this make? A stubborn public perception remains that benefits in a Defined Benefit scheme are entirely without risk. Whilst risk is not borne by members, this is not the same as believing that there being no risk at all: the open-ended commitment made by scheme sponsors is potentially particularly onerous and it would be beneficial if the public were to understand this better, and also the safeguards provided by the PPF

6 - 6 - Question 3 Is there any evidence to support the view that current investment choices may be suboptimal? If yes, what are the main drivers of these behaviours and how could they be changed? a) Do trustees/funds have adequate and sufficient investment options on offer in the market? Is there anything Government could do to address any issues? Schemes investment strategies are determined on a case-by-case basis, and it is therefore not entirely appropriate to comment on the Defined Benefit universe as a whole. Certainly, there is a wider range of options available to larger schemes. However, smaller schemes are able to access many of these options if their trustees decide to use a delegated/fiduciary mandate. b) Do members need to understand the investment decisions that are being made? If yes, are there any specific decisions that need articulating? We see no advantage in helping members better understand investment decisions for Defined Benefit schemes. c) Would it be appropriate for the Regulator to take a lead in influencing or determining an acceptable overall level of risk for a scheme in a more open and transparent way? We believe that any intervention by the Regulator might result in conflict with the advice given by a scheme s investment advisers. This would not be constructive. We consider the Regulator s efforts are better directed at ensuring trustees are taking appropriate advice from their investment advisers and that trustees have sufficient knowledge to be able to make appropriate decisions on the basis of the advice received. d) Would asset pooling or scheme consolidation help schemes to access better investment opportunities? Consolidation would see smaller schemes adopt the characteristics of larger funds. There are examples of pooled investment strategies being used successfully, and, where this works, it would create more funding/investment options (see the response to 3 (a)). However, it does require careful thought to ensure that any consolidation does not create more problems than it solves, for example in relation to the potentially different funding/investment requirements of the various sections of the consolidated scheme, which may vary depending on a constituent scheme s liability profile and sponsor covenant. e) Is regulation (including liability measurement requirements) incentivising overly risk-averse behaviours/decisions that result in sub-optimal investment strategies? If yes, which regulations and how do they impact on these decisions? We are concerned that trustees are under pressure to adopt unnecessarily risk-averse funding strategies.

7 - 7 - f) Are you aware of evidence of herding or poor advice from the intermediaries and advisors? We are not aware of this as a problem. g) Are measures needed to improve trustee decision making: skills such as enhanced training, more Regulator guidance, or the professionalisation of trustees? We believe strongly that trustee boards need to do more to help them play a more active role in determining schemes funding strategies. We suspect that too often boards are relying on rather than challenging the advice they receive. We agree that there is a greater role for professional trustees to play, but lay trustees need to be better educated if they are to be confident and effective in their role. We believe strongly that too few boards are sufficiently well educated that they are able to challenge the recommendations of their advisers. It may be that this is a challenge too far, apart from in the largest pension schemes or where there are specific skills amongst the trustee board. We suggest trustee boards d be encouraged to first focus on those decisions which have the greatest impact, ie the strategic direction of their investment policy, and then to consider what is the best model to implement that strategic direction, This may be involve delegation of some or all of the implementation decisions.

8 - 8 - Question 4 Is there a case for making special arrangements for schemes and sponsors in certain circumstances such as a different regime for employers who can afford to pay more, and/or new or enhanced flexibilities for stressed sponsors and schemes? a) Do you have any evidence that Deficit Repair Contributions are currently unaffordable? This again is a question that can only meaningfully be addressed on a case-by-case basis. The consultation notes that there are examples where Deficit Repair Contributions are causing significant hardship. Equally, there is third party analysis suggesting that many employers are making significant dividend payments compared to their deficit contributions. Both of these situations suggest that the Regulator s promotion of Sustainable Growth requires review. b) Should we consider measures to encourage employers who have significant resources as well as significant DB deficits to repair those deficits more quickly? If so, in what circumstances, and what might those measures be? It is clearly inappropriate for well-resourced employers to set an unnecessarily long recovery plan. Strengthened regulation, or a more proactive Regulator could prevent this. Thought should also be given as to whether legislation can help to avoid a well-resourced employer becoming a stressed employer, for example on the change in the ultimate control of a scheme sponsor. c) If measures are needed for stressed sponsors and schemes, how could stressed be defined? Should a general metric be used, or should this be decided on a case by case basis? This has to be decided on a case-by-case basis. d) Are there any circumstances where stressed employers should be able to separate from their schemes without having to demonstrate that they are likely to become insolvent in the near future? We believe that this should be permitted in very limited circumstances and only if it can be demonstrated that it is in the members best long-term interests. e) How would it be possible to avoid the moral hazard of employers manipulating such a system in order to off load their DB liabilities? Would some sort of quid pro quo be appropriate to ensure the scheme is not disadvantaged relative to other creditors of the employer/stakeholders? What could this look like?

9 - 9 - The Regulator would require more powers to enable it to investigate an employer s circumstances more effectively. It would probably also need to be able to intervene at an earlier stage (or look back over a longer period), to prevent (or reverse) transactions which separate a pension scheme from the tangible assets of its sponsor f) Are there any circumstances where employers should be able to renegotiate DB pensions and reduce accrued benefits? If so, in what circumstances? This formed the first question of our survey. The response to the first part of the question was as follows: Yes 30% No 70% The second part of the question asked under what circumstances accrued rights might be renegotiated. Respondents could select more than one answer. Responses were as follows: No. Responses Funding level falls below a predetermined threshold 28 To facilitate a corporate transaction 11 To keep a stressed scheme out if the PPF 55 Other (describe below) 14 Other included the following suggestions: To redress the balance of intergenerational unfairness in the workplace Personally, as a 'younger' member of the population, this is almost entirely about inter-generational unfairness. We're funding older people's pensions, with no hope of ever having the same level of retirement benefits ourselves. Improvements to DB benefits has been imposed by regulation (e.g. indexation), and sponsors are consequently forced to pay more in to DB schemes to fund benefits that they never intended to offer. The real loser is the younger generation of workers. I think that sponsors should be able to repeal these forced improvements to DB benefits, and re-invest that money to the (presumably) younger generation of workers via increased employer DC contributions.

10 We asked an additional question, which was: Do you think there is a risk that unscrupulous employers could manufacture a scenario that would permit them to renegotiate accrued DB benefits and reduce them? Responses were as follows: Yes 94% No 6% Comments included the following: I suggest tpr would be required to approve each exercise to avoid this. Unfortunately there will always be individuals who look to bend / stretch rules. They are only likely to be deterred if there is a significant chance that they are found to be breaking the law and prosecuted severely if this is the case. If the employer were to be permitted to have this flexibility, then there should be a statutory third party involved who could support the trustees in the event of employer abuse. g) Is there any evidence to suggest that there is an affordability crisis that would warrant permitting schemes to reduce indexation to the statutory minimum? We note above that funding of Defined Benefit pension schemes is undoubtedly hard for some employers, which has always been the case, but there does not appear to be evidence across the economy. Indexation is but one of a range of factors which impinge on the burgeoning cost of funding a Defined Benefit pension scheme. Changing the basis of indexation is just one of the options that might be considered for a stressed scheme. [It may have the advantage of meaning no immediate change to a pension in payment, but ultimately is no different to other options (eg a one-off reduction to all pensions, or a removal or reduction in a contingent spouse s pension). If benefits are reduced, and however this is achieved, it will reduce the value of benefits to members and lead to a higher call on the State either now (eg if the reduction is immediate) or in later years (eg if indexation is removed).] h) Should the Government consider a statutory over-ride to allow schemes to move to a different index, provided that protection against inflation is maintained? Should this also be for revaluation as well as indexation? This was the third question of our survey. Responses were as follows:

11 Yes, but the Government should only be permitted to revalue preserved benefits Yes, but the Government should only be permitted to revaluate the indexation of benefits in payment Yes, the Government should be permitted to revaluate both the preserved benefits and the indexation of benefits in payment 7% 7% 55% No no statutory override should not be permitted 31% Additional comments included the following: The current situation places far too much reliance on how indexation and revaluation were documented in scheme rules: one lawyer could draft "statutory minimum" and another "RPI", while both meaning the same thing. I would say, however, that trustees and employers should have to reach agreement on any change to their current method of indexation/revaluation. I believe it should go further and allow pre-88 GMPs in payment and all preserved benefits GMP liabilities, where the Scheme is required to provide fixed rate revaluation, to be changed and revalued by CPI (or similar). It should be subject to negotiation for individual schemes with appropriate regulatory over view i) Should the Government consider allowing schemes to suspend indexation in some circumstances? If so, in what circumstances? We split this question into two parts, which were: Should the Government consider allowing schemes to suspend indexation in some circumstances? Yes 43% No 57% and Under what circumstances could indexation be suspended? Select all that apply. No. Responses When funding level falls below a predetermined threshold 49 To facilitate a corporate transaction 10 To keep a stressed scheme out of the PPF 81

12 Other (describe below) 18 Comments included the following: I think this could apply in other situations, but I would not want to see blanket permission - for me this would have to be something companies and trustees apply for to the Regulator and they would have to demonstrate that this would improve security for members' benefits To address inter-generational unfairness as per previous comments. To keep a stressed scheme out of the PPF and only in respect of backdated overriding statutory increases such as anti-franking and increases in deferral to post 1985 increases. As a matter of principle, pensions and their increases agreed freely between employer and employee for future service (i.e. without backdated statutory override) should in my opinion be sacrosanct. Changing accrued benefit promises should only be made in the most severe stressed situations to keep the scheme out of the PPF. However, the indexation should be caught up in future if the financial position changes. Indexation should not be reduced further than PPF levels. j) How would you prevent a sponsoring employer from only funding a scheme to a lower level in order to take advantage of such an easement? A scheme s Recovery Plan would be based on achieving a funding level required to support current statutory indexation requirements. Any deviation from this would require the explicit consent of the Regulator and would reflect significant change to the employer covenant since the most recent valuation. k) Should Government consider allowing or requiring longer, deferred or back loaded recovery plans? If so, in what circumstances? Should other changes be considered, such as the valuation method of Technical Provisions? Long recovery plans are already permitted: a recent high-profile case involved a scheme with a 23-year Recovery Plan. Whilst far from ideal, arrangements which would allow a stressed employer to retain responsibility for a scheme and keep it out of the PPF are necessary and should be permitted. l) Should it be easier to take small pots as a lump sum through trivial commutation? [It is normally straightforward to make a small lump sum payment of up to 10,000, although we understand there are currently some problems with contracting-out legislation. However, it is more difficult to pay (and difficult to police ) a trivial lump sum between 10,000 and 30,000, and can cause confusion for members with both DB and DC benefits, which include this flexibility (and more). We

13 suggest serious consideration is given to putting DB and DC schemes on a level playing field where the cash available is under 30,000.

14 Question 5 Do members need further protection, and should this be delivered by a stronger and more proactive Regulator, and/or trustees with enhances powers? a) Would greater clarity over the requirements for scheme funding be helpful to members and to sponsors? If so, would this be better set out in detail in legislation or through increased guidance and standards from the Regulator? We believe this would be a helpful initiative. We believe strongly that this should be most effectively achieved through the Regulator than through legislation. b) Is it possible to design a system of compulsory proactive clearance by the Regulator of certain corporate transactions, without significant detriment to legitimate business activity? If so how? What are the risks of giving the Regulator the power to do this? High-profile recent cases have demonstrated that an effective mandatory pre-clearance system is necessary. This would of course require negotiations to be conducted in secrecy with all participants bound by Non-Disclosure Agreements. The obvious risks are the leaking of commercially sensitive information and the potential to delay decisions that need to be concluded promptly. c) Should the Regulator be able to impose punitive fines for corporate transactions that are detrimental to schemes? If so, in what circumstances? This was our fifth survey question. We asked: Should the Regulator be able to impose punitive fines for corporate transactions that are detrimental to schemes? The fines would be in addition to the ability to request the company to make further contributions into the pension scheme. Yes 80% No 20%

15 and Under what circumstances should the Regulator be able to impose punitive fines for corporate transactions that are detrimental to schemes? Select all that apply: No. Responses The Regulator should be permitted to impose fines when employers seek to game the PPF The Regulator should be permitted to impose fines when employers obstruct a tpr investigation The Regulator should be permitted to impose fines when employers fail to disclose relevant information during clearance negotiations The Regulator should be permitted to impose fines when employers fail badly in conforming to a recovery plan Other (describe below) 17 Comments included the following: It's too hard to define "game" unambiguously. Any clearance obtained without disclosing relevant information should be invalid. Fines for failing to conform to a recovery plan should depend on the employer's behaviour. eg if the contributions due are just used as dividends or similar a fine could well be appropriate. The moral hazard regime should be hardened to give tpr more power and tpr must use their powers as a deterrent. on sale of a business (and scheme) an employer should make a written declaration explaining why it believes the new sponsor will be able to support the scheme. I would have ticked the third point also, if this had said "knowingly" fail to disclose. As concerns point 4, it may also be something that should be liable to a fine if this concerned a negligence on the part of the employer, rather than something that was out of the control of the employer.

16 d) What safeguards could ensure that any additional powers given to the Regulator do not impact on the competitiveness of the UK business or the attractiveness of the UK market? We do not believe that any specific safeguards are required. e) Should the Regulator have new information gathering powers? Currently, the Regulator s information-gathering powers are confined to information provided as part of a scheme s Annual Return and information disclosed by whistle-blowing. We believe that giving the Regulator the power to investigate schemes proactively would be beneficial. f) Should civil penalties be available for non-compliance? We believe that this would be very helpful. g) Should levy payers be asked to fund additional resources for the Regulator? If this is to be the only option for providing additional resources, then this must be the price paid by DB schemes. h) Should trustees be given extra powers such as powers to demand timely information from sponsors, to strengthen their position? If so, what extra powers might be helpful? We believe there should be a statutory requirement to disclose plans for corporate transactions which would affect the scheme s funding, and/or the assets likely to be available to cover a scheme s solvency deficit, or which might reasonably be expected to be available at a future date. i) Should trustees be consulted when the employer plans to pay dividends if the scheme is underfunded and if so, at what level of funding? We are not persuaded that a statutory requirement would be necessary in these circumstances; ; this could be covered under any strengthening in line with h) above. j) Is action needed to ensure that members are aware of the value of and risks to their DB pensions? We do not believe that any changes need to be made to existing disclosure requirements.

17 Question 6 Should Government act to encourage, incentivise, or in some circumstances mandate the consolidation of smaller schemes into vehicles with greater scale and better governance in order to reduce the risk to members in future from the running down of closed, especially smaller, DB schemes? a) Is there anything in the existing legislative or regulatory system preventing schemes for consolidating? How might such barriers be overcome? We do not believe that there are insuperable legal obstacles to consolidation. b) What other barriers are there which are preventing schemes from consolidating? How might they be overcome? Our survey asked: Legal constraints aside, what are the principal barriers to the consolidation of DB pensions schemes? Select all that apply: No. Responses Differences in funding level 210 Differences in employer covenant 194 Differences in corporate culture 82 Differences in scheme maturity 124 Other (state below) 38 Comments included the following: I am a trustee for a mid size DB scheme. I believe that members of our scheme take comfort from knowing a number of the trustees on a personal basis - if smaller schemes are consolidated this "personal touch" would be lost, and therefore members of such schemes might have less trust that their pension benefits were being well protected. There are also differences in how funds might have promised benefits to members historically - consolidation of schemes might result in a risk that some of these differences are not preserved, with the result that members do not receive the benefits they are expecting in retirement.

18 transfer legislation - member consent requirements/consultations. Structure would need to be that each Employer is liable for own deficits only and not be expected to pick up the liabilities of future orphan liabilities - as currently happens in Industry wide schemes. None of the above need to be barriers - segregated master trust arrangements avoid all of them. The main barrier is Trustee boards being willing to put themselves out of a job by bulk transferring in to a consolidator, although there's probably work-arounds. Differences in benefits! Astonishingly high cost of doing so - money and management time. Most closed DB schemes are due to disappear once gilt yields become high enough. Vested interest of Trustee advisers in not making companies aware of consolidation options. Advisers don't spend the time educating themselves (or are simply not interested in finding out) about how consolidation through DB Master Trust would work. Under this approach benefits are in a ring fenced section, members benefits remain unchanged, separate valuations for each section, balance of powers remains unchanged, and still significant economies of scale can be achieved. c) Should Government define a simplified benefit model to encourage consolidation? We believe that formal Government guidance would be beneficial. d) Should rules be changed to allow the reshaping of benefits without member consent? In what circumstances? Should there be prescribed restrictions to the types or limits of such reshaping? Again, we split this question into two parts: Should there be overriding statutory provision to allow schemes to reshape benefits or reduce accrued benefits without member consent? Yes 21% No 79% Under what circumstances should there be overriding statutory provision to allow schemes to reshape benefits or reduce accrued benefits without member consent? Select all that apply: No. Responses This should be allowed to keep a scheme out of the PPF 46 This should be allowed to accommodate corporate transactions 7 This should be allowed to reduce a deficit 17

19 Other (state below) 7 Suggestions offered in response to the other option included the following: To scrap benefit improvements imposed by regulation. Section 67 only. This should be allowed to reduce unsustainable deficits, not just any deficit. e) Are costs and charges too high in DB schemes? and f) Should schemes be required to be more transparent about their costs or justify why they do not consolidate? In what circumstances? We would argue that these questions are more obviously relevant to DC schemes. g) Is there a case for mandatory consolidation? In what circumstances? We asked: Are there any circumstances where mandatory consolidation would be appropriate? Yes 51% No 49% and Under what circumstances might mandatory consolidation be appropriate? (select all that apply) No. Responses Employer insolvency 90 To keep a scheme out of the PPF 84 To allow smaller schemes to be managed more efficiently 71 To improve governance standards 59

20 Other (describe below) 10 Suggestions for other included the following: Some of the very smallest schemes have poor governance because they cannot afford better governance and they may not seek advice when they should, because of a wish to cut costs. There may be a case for consolidating such schemes; however, one has to question whether the employers involved would be able to afford the consolidation. To facilitate industrial re-structuring. In the 1930's the Bank of England was heavily involved in restructuring declining industries e.g. textiles and coal mining. LINK LINK Future government intervention e.g. steel would need to address pension issues. Is there a case for consolidation as a cheaper but more efficient form of buy-out, with the employer and trustees discharged? Yes 68% No 32% What should be the requirements to enter such a consolidator? Select all that apply: No. Responses There is a case for consolidation when the scheme sponsor is no longer actively trading There is a case for consolidation when the scheme size is below a given threshold There is a case for consolidation when the scheme funding level is below a given threshold There is a case for consolidation when the employer is insolvent 124 Other (describe below) 14 Suggestions for other included the following: Although in principle agree with some form consolidation there needs to be safeguards to stop only underfunded or weak sponsors using such a facility. I am not sure how the consolidated product will be funded and what risks the members run as regards

21 future funding levels as the only way to secure benefits is via an annuity. As far as I know, the consolidator product will be invested (not via an annuity), therefore will still be running economic and demographic risks. I think this should be explored further but I reserve my judgement as to whether I think it will work in the long run. Employer insolvency etc. is probably better dealt with by the PPF unless the scheme isn't in deficit. There is a case for consolidation where there is a combination of scheme costs being significantly higher than average, funding level and/or the employer covenant is below a given threshold and there may be an argument for different combinations of these thresholds applying to schemes of different sizes. h) Should the Government encourage the use of consolidation vehicles, including DB master trusts? If so how might it do so? We believe that consolidation has a role to play in addressing funding problems and also in improving governance standards. However, consolidation should not be seen as a panacea. i) Are further changes needed to the employer debt regime in multi-employer schemes to encourage further consolidation? We believe the last man standing nature of Section 75 debt remains a major obstacle. j) Is there a case for consolidation as a cheaper, but more efficient form of buy-out, with the employer and trustees discharged? If so, (a) what should be the requirements for a scheme to enter such a consolidator, especially the level of funding; and (b), should the residual risk be borne by the member, or by the PPF? k) Should Government encourage the creation of consolidation vehicles for stressed schemes? Yes 62% No 38% Additional comments included the following: It is unclear what market failure this would look to solve. The PPF is available for schemes where the employer has failed. There are a number of actions that employers and trustees can look to implement to reduce the burden of a high pension deficit. We already have a consolidation vehicle for stressed schemes: it is called the PPF. Any attempt to discharge employers and trustees at a cost less than buyout cost leaves a potential liability that has to be met by somebody...

22 There should be an overriding assumption that the primary objective is the protection of members' accrued rights and/or pensions in payment. l) Should employer debt legislation for multi-employer schemes require full buy-out and for the actuary to assess liabilities for an employer debt by estimating the cost of purchasing annuities? We believe that this would be necessary. m) How else could historic orphan liabilities be met if they were not shared between employers? We believe that this (sharing them between employers) would be the only viable option. n) Are new measures needed to help those trustees of an association or employers who could be held individually liable for an employer debt? We do not believe that additional measures are required. ***** ***** *****