Steel pension rule changes should be open to all, says Aon, on the day the British Steel Pension Scheme consultation closes

 
Hayley Kirton
Follow Hayley
Business Secretary Sajid Javid Attends Crisis Talks At TATA Steel Plant
The consultation into what could be done to reduce the British Steel Pension Scheme's liabilities closes today (Source: Getty)

Any changes to pension rules should apply across the board and not just to select industries, Aon Hewitt has told the government.

The consulting giant has today revealed that, in its response to a Department for Work and Pensions consultation examining possible changes that could be made to the British Steel Pension Scheme, it advised that any amendments made needed to be universal and transparent.

"Tata Steel is not alone nor even an extreme example of how a defined benefit (DB) pension plan can become a challenge to a sponsor's business," said Kevin Wesbroom, senior partner at Aon Hewitt. "The issue of increasing DB costs affects all sponsors of DB schemes.

"Any solutions should not be specific to Tata Steel but open to other schemes with distressed employers. Parliament will need to decide how it is going to ease the burden of DB provision for sponsors in distressed situations, and who will decide and how it will be decided which cases are relevant."

Read more: Trustee warns over future of the British Steel Pension Fund

The British Steel Pension Scheme consultation, which was opened by the Department for Work and Pensions last month, closes at 11:45pm tonight. Although various options are up for debate, one possible solution would involve changing legislation to lower the scheme's liabilities.

Earlier this week, the Pension Protection Fund (PPF) revealed its response to the consultation, which warned that altering legislation could set a precedent that would result in other struggling companies trying to follow suit.

While Hargreaves Lansdown itself has not responded to the consultation, Tom McPhail, head of retirement policy, told City A.M.: "We don’t believe that a robust case has been made for a one-off revocation of pension law just to deal with this short-term situation. The moral hazard created by a heads-we-win, tails and the PPF loses approach is potentially unfair to the members and sponsors of the thousands of other pension schemes in the UK."

Meanwhile, former pensions minister and now director of policy at Royal London Steve Webb has previously told City A.M. that modifying the law especially for the British Steel Pension Scheme could effectively drive "a cart and horses" through the existing pensions protection rules and make it difficult to turn away businesses looking for similar concessions.

Read more: The pensions lifeboat's potential load just got heavier

Royal London has also warned that some of the changes under consideration could result in some scheme members being up to £10,000 out of pocket compared with the current level of benefits they are entitled to.

Aon's Wesbroom continued: "If legislation is changed to permit compromising benefits, then any such change should be honestly and transparently addressed. We should avoid devices such as scheme reconstructions as mechanisms that will lead to benefit compromise."

A Department for Work and Pensions spokesperson said: "We are consulting on a wide range of options for the British Steel Pension Scheme and are keen for as many people as possible to provide their views, including those who will be affected by any changes."

The collapse of BHS has also helped to make DB pensions a hot topic as of late. When the retailer was put into administration in April, it carried a pension deficit worth £571m.

Related articles