Terms of Reference
The terms of reference for the review were set out in a letter from James Purnell, Minister of State for Pensions Reforrm, placed in The House of Commons on 23 April 2007 and is reproduced below.
Review of the use of assets in FAS pension schemes
Having now settled the public expenditure support for these schemes, the Secretary of State for Work and Pensions will establish a review to examine how we make best use of the assets in pension schemes that are winding up under funded with an insolvent employer or who come within the extension for solvent employers whose schemes signed a compromise agreement.
The intention of the review is to determine how these or other sources of non-public expenditure funding (that have not already been allocated) could be used to increase assistance for affected scheme members. The review will be open to any suggestions from interested and concerned parties.
Scope
- The review will focus on those pension schemes that are eligible for assistance from the Financial Assistance Scheme (FAS). That is, those schemes that started winding up between 1 January 1997 and 5 April 2005 as a result of the sponsoring employer becoming insolvent.
- The review will include those schemes where, in the same period, agreements were signed to compromise pension scheme debt in order to prevent an employer insolvency.
- The review will (other than the above) not include schemes that were wound up by a solvent employer; schemes that are eligible for the Pension Protection Fund, or schemes that wound up prior to 1997.
Objectives
- To determine the potential value, current stewardship and current allocation to different asset classes of the assets that were the property of the relevant pensions schemes on their commencement of wind up, in order to assess what assets might be available.
- To make recommendations on the optimal use of these assets, bearing in mind:
- The optimal economic use of these assets for meeting the liabilities;
- The implementation issues - ensuring any proposals for asset reallocation or change of stewardship are feasible
- The ongoing administrative issues and costs involved in any proposals
- The transfer of risk, including to the Government.
- To determine whether there are other pension schemes (in addition to those with compromise agreements) where, although the sponsoring employer did not undergo an insolvency event, it would not be reasonable to expect the employer to have a continuing responsibility for supporting an under funded scheme.
- The review will present appropriate risk management structures for any proposals, to ensure the pension scheme member benefits are no less protected than currently and that any risks to the wider taxpayer are minimized.
- The review must ensure that the benefits of all members of these pension schemes should be taken into account.
- The review should not propose solutions that would subject HM Government on behalf of the taxpayer to the management of significant incremental risk.
- Other credible non tax funding sources should be investigated, particularly where contributions to the scheme from external sources are deemed possible.
- The review should engage all relevant stakeholders on the feasibility of any proposals.
- The review must ensure the speed of payment of assistance to scheme members is not unduly impeded.
