31 August 2016
The Pensions Institute was set up as part of the Cass Business School as the first and, as yet, only UK academic research centre to focus exclusively on pensions matters. It’s contributors have published a series of academic research papers, combined with Practitioner Reports – the latter perhaps more accessible to the non-academic.
The latest report, authored by Keith Wallace1 is titled “Milking and Dumping: The Devices Businesses use to Exploit Surpluses and Shed Deficits in Their Pension Schemes”
The first part of the paper provides a historical perspective on the rise in significance of defined benefit pension schemes and the emergence of significant surpluses (remember those days?) in the 1970s to 1990s. Wallace then provides more than twenty specific and named examples of cases where scheme surpluses were extracted and sorts these into general themes that were employed at that time.
The second part of the paper notes the emergence of widespread pension scheme deficits, the factors driving this and again highlights general categories of activity that can be used to engineer either a value transfer from the scheme or a shedding of liaibilities.
Wallace then concludes with a section on lessons to be learned and makes some suggestions for change in behaviour, regulation and legislation.
The paper is detailed and possibly may be controversial for some readers. Nevertheless, I believe it shines a necessary historic spotlight on previous practices and also provides a series of quite practical suggestions for areas that trustees, corporates and advisers should focus on in order to ensure that member interests are protected going forwards. The timing – with a number of high profile scheme cases in the news – is of course felicitous.
- Keith is President of the Association of Corporate Trustees and Chair of the Legal Advice Panel of the Pensions Advisory Service