Goode Report: Report urges ban on surplus-dipping: Employers' Rights
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Your support makes all the difference.COMPANIES should be prohibited from taking a payment from their pension fund's surplus unless they have express approval from a new regulatory body, according to the Goode Committee's report, writes Paul Durman.
The committee has proposed the creation of a powerful regulator, able to investigate and wind up badly run schemes.
It recommends that the repayment of surplus to employers should be allowed only in strictly defined circumstances - where the scheme has introduced price indexation for past and future benefits and where the regulator is confident that employees' rights will remain secure.
But the committee's report supports the rights of employers to take contribution holidays, except where this would reduce the pension scheme's funds below a minimum solvency level. It suggests that the time allowed to pension funds to eliminate excess surplus should be extended, reducing the pressure on employers to take contribution holidays.
The Campaign for Pension Fund Democracy was disappointed that the Goode Committee had supported employers' claims to ownership of the surplus. The union-backed body said the report left employers free to take contribution holidays, remove money from the pension fund and do 'almost anything they like with the surpluses'.
Bill Day, the campaign secretary, said: 'In trying to come to terms with the conflicts of interest, they have taken the employers' line.'
The report calls for schemes to have to meet a minimum solvency level. A pension fund would have to demonstrate that, on winding up, it could meet 100 per cent of its liabilities, which are defined as providing members with the cash equivalent of their accrued benefits. Should any scheme's funding fall below 90 per cent of the solvency standard, the pensions regulator would require the employer to inject funds within three months of notification. Trustees and scheme actuaries would have a duty to report any shortfall, either below the 100 or the 90 per cent level.
Schemes falling beneath the 100 per cent level would be required to agree a business plan to restore minimum solvency within three years. The actuary would have to certify the pension fund's solvency annually.
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