View from City Road: Problems still lurk in pensions minefield
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Your support makes all the difference.For a government to embrace a report in the wholesale way Peter Lilley, Social Security Secretary, has accepted the Goode Committee's recommendations on pension law reform, is always a surprise, but it is doubly so in this case; all the hints were that he had dropped most of its key recommendations.
Like the Taylor report on football grounds, what Goode had to say addressed a yawning gap in the legislation dealing with pensions and widespread public outrage over one appalling incident. For Hillsborough read Maxwell.
To prevent a recurrence of that nightmare has been the Government's prime objective. The aim was to do without excessive interference or causing pension provision to become more costly and benefits less generous.
There are departures from Goode. The Government is firm that the cost of establishing a regulator and financing a compensation fund should come from a levy on the industry - in other words, sponsoring employers - rather than taxpayers, as Goode suggested,
The White Paper also goes no further than to encourage the idea of employee trustees. Goode's recommendation that employers trying to snaffle pension fund surpluses - less of an issue in the 1990s - should ask the regulator first, has been ignored too.
Goode proposed a statutory solvency test for all pension funds. Again, this has been watered down in the White Paper. Funds failing the solvency test - less than 10 per cent of the total at the last count - have been given a five-year period from 1997 to put matters right.
There is still room for concern that a 100 per cent solvency requirement might be too inflexible to deal with sudden market movements. But alarmist fears that pension fund managers would be forced by the test to flee the equity market and invest in less volatile gilts as a result of the test can now be safely dismissed. In all, Mr Lilley seems to have steered a remarkably skilled course through a field well known to be littered with mines. Now for the more serious problem; how to pay for those who make no adequate provision for their old age in the first place. Solutions to this burgeoning problem won't be quite so simple.
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