top stories

Comments from ACCA
August 2005

Association of Chartered Certified Accountants (ACCA) is pleased to comment on the consultation paper on the above matter. ACCA is a professional accountancy body which represents some 340,000 members and students around the world, around half of them in the UK and the rest in many countries around the world. Our members work in public practice, business and the public sector and in entities of all sizes. The comments in this response are prepared on behalf of those of our members who have management responsibilities for or professional interest in occupational pensions issues.

We have the following comments on the detailed text of the draft regulations and the specific consultation questions posed.

Question (a) (regulation 3)

The paper says that the Department’s intention is to ensure that, in the case of non-segregated multi-employer schemes, the regulation should apply to the principal employer, who has the power to make decisions. We suggest that the draft does not achieve this objective, since draft regulation 3(1)(c )(i) would apply to a person who is not an employer in relation to the scheme.

Regulation 4

On a point of detail, regulation 4(1)(a) refers to a ‘public service pension scheme’ while regulation 4(4) refers to a ‘public sector pension scheme’. These terms need to be harmonised.

As a wider point, the regulations, by virtue of being applied by reference to firm size, would create a substantial difference in the rights of scheme members to be informed of important changes to their pension schemes as between those in small firms and those in larger firms. We query the appropriateness of adopting this sort of approach. We acknowledge the concern which presumably is being shown for the administrative implications for smaller firms. But major changes to pension scheme rules are likely to be material to scheme members whatever the size of their employer, and members in smaller businesses will be just as concerned about important pending changes as their counterparts in larger firms. The adoption of an approach which takes into account the number of employees within a business, and not necessarily the number of members of the sponsored pension scheme, both in terms of active and deferred members, is also questionable. This is, in our view, a matter which could give rise to significant discontent among scheme members in smaller firms.

Question (f) (regulation 8)

The listed issues, i.e. those which an employer would be required to consult on, do not encompass an employer’s intention to take a contribution holiday or to change the basis of the scheme (e.g. from defined benefit to money purchase). Both these issues should, arguably, be covered.

Question (k) (regulation 10)

It is proposed that employers give written notice of proposals which were designed to come into effect within two months of the notice being given. Such a time scale would be so short as to call into question the seriousness of the whole process of consultation. If the intention behind the new regulations is to generate a substantial and open discussion between employer and scheme members about the merits of the former’s proposals, then the outcome of those discussions must not appear to be pre-determined. There must therefore be allowed a period which is long enough i) to allow members and their representatives to consider and respond properly to the employer’s proposals and ii) to enable the employer to give proper consideration to the response(s) of members. Also in the same vein, we suggest that the legislation should avoid linking the period allowed for consultation to the date when the employer intends his proposals to come into effect – this again appears to suggest that the result of the consultation will be a fait accompli.

We also note that consultation would have to be between the employer and current and prospective members of the scheme. There is no mention of the interests of deferred members of the scheme, who may also have a material interest in the proposals of the employer.

Question (l) (regulation 11)

The consultation paper suggests that the employer would be required to consult with ‘one or more’ of the parties listed in regulation 11. The draft regulation itself however says that the employer must consult with whichever of the parties he chooses. We do not believe that the two criteria amount to the same thing. We recommend therefore that the regulation expressly states that the employer must consult with one or more of the parties listed. There might also be a reference to any bilateral arrangement which would normally oblige the employer to consult a particular party on this type of issue.

Back to top