Press Release The Pensions Management Institute Pensions Professionals in practice PENSIONS EXPERTS VOICE CONCERN AT LATEST GOVERNMENT PROPOSALS At today’s PMI Spring Conference ‘Pensions Revolutions!’ Philip Read of CarnaudMetalbox (UK) Ltd expressed his doubts that the much publicised Pension Protection Fund (PPF) would work in its current format. Mr Read felt that the proposed levy would penalise employers with well funded and well managed pension schemes, whilst subsidising employers with underfunded and risky ones. Raj Mody of Hewitt Bacon & Woodrow also voiced concern that PPF would not be getting off to the best of starts. “It is clear that the levy in the first year is not going to be adequate. The situation will be exacerbated by schemes clinging on until the PPF is established, at which point they might make a claim. In the first year the PPF will get half the right levy but more than double the usual claims” Mr Mody concluded by saying that “The risk based element should form a larger part of the overall levy, much more than the targeted 50% - nearer to 100%. A sound approach to a risk-based levy could encourage stronger employers to ramp up the funding of their schemes, as some US companies have, and reduce their levy, which could welcome extra security for members”. Unfortunately, Pensions Minister Malcolm Wicks, who was scheduled to answer these concerns was forced to pull out of speaking at the Conference due to Parliamentary commitments. Peter Askins of the Policy Unit at DWP ably stepped in at short notice. Cont/... Secretary General: Susan M Howlett BSc PMI House 4-10 Artillery Lane London E1 7LS Telephone: 020 7247 1452 Fax: 020 7375 0603 Email: firstname.lastname@example.org www.pensions-pmi.org.uk Registered at the above address. Registered with limited liability No 1262100 in England There was more optimism for the Inland Revenue’s tax simplification proposals which Mr Read said were “positive even if the implementation task is enormous”. Louise Phipps of BP plc stated that when considering the Revenue’s proposals “schemes should embrace the changes and take advantage of the opportunity to rethink what they currently do and make it even better”. Tilly Ross, Consultant at Towers Perrin stated that “The impact of the Tax Reforms will be highly personal. There will be a need to look at other forms of pay, as well as pensions and flexibility will be very important. Individuals will also have to make some complex decisions and employers should consider how to support this process.” In the afternoon, talk moved to security for members. Piers Bertlin of Mercer Investment Consulting, felt that the Pensions Bill might give concern to the minority of trustees who had been complacent about investment matters. Independent pensions consultant, Dr Ros Altmann, who has spoken on behalf of the ASW and Maersk pensioners amongst others, was strongly critical of the Government’s resistance to compensate workers who had seen their pension schemes disappear: “these people trusted the system and it let them down. If you don’t make this good, how can anyone trust the system in the future ?” Looking ahead at the new Pensions Regulator, Harriet Maunsell OBE , Chairman of Opra, said that the role would reflect the very thorough work done by Alan Pickering, the NAO and the Quinquennial Review. Although a new regulator, it would build on the work started by Opra. - Ends 11 March 2004 Press Enquiries: Vince Linnane, Head of Communications & Events, PMI tel: 020 7247 1452 or email email@example.com PRESS QUOTES Raj Mody, Hewitt Bacon & Woodrow Overall Raj Mody, principal consultant at Hewitt Bacon & Woodrow welcomed the Pensions Protection Fund (PPF), as a much needed step to help restore confidence in pensions. The move to restrict the level of future pension increases covered by the Fund at least gives a chance that the premium to be paid will be affordable. However, Mr Mody, who heads up Hewitt Bacon & Woodrow’s Leeds office, also commented: “It’s good that the Government has acknowledged that the levy eventually needs to be set using a risk-based approach. This will make allowances for the individual circumstances of schemes, including the strength of the sponsoring employer, the size of any deficit and the risks inherent in their investment policy. But the risk-based element should form a larger part of the overall levy, much more than 50% and nearer 100%. A sound approach to a risk-based levy could encourage stronger employers to ramp up the funding of their schemes, as some US companies have, and reduce their levy, which could welcome extra security for members.” Philip Read, CarnaudMetalbox Philip Read, UK Pensions Manager at CarnaudMetalbox, noted the cost for pension schemes of poor decisions by various UK governments over many years. Read said “The Treasury proposals for simplification are positive, but the implementation task is enormous, and the lack of regulations inhibits the commencement of the detailed work for every pension scheme that will be needed before the proposals come into effect.” Tilly Ross, Towers Perrin Ms Ross commented “there has been a lot of talk about the total number that will be affected (by the Tax Reforms) but for an employer the key issue is how many of their people are affected and who are they.” Louise Phipps, BP Pension Fund Ms Phipps commented “schemes should embrace the changes and take advantage of the opportunity to rethink what they do and make it even better.” Piers Bertlin, Mercer Investment Consulting Mr Bertlin commented “Myners has acted as a catalyst in encouraging Trustees to consider an array of investment issues more deeply. The Pensions Bill might give concern to that minority of trustees, on the other hand, who are complacent about investment matters.” Dr Ros Altmann, Independent Pensions Consultant Dr Altmann commented “these people trusted the system and it let them down. If you don’t make this good, how can anyone trust the system in the future?” Harriet Maunsell OBE, Opra Chairman Ms Maunsell commented “the Pension Regulator, as created by the Pensions Bill, reflects the very thorough work done by Alan Pickering, the NAO and the Quinquennial Review. It will be a new regulator, but building on the work that has been started by Opra”.
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