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Friday, 30 March, 2001, 08:47 GMT 09:47 UK
Could it happen again?
Old woman collecting her pension at the post office
There is still a risk that pension funds could be pilfered
"I own the pension scheme," Robert Maxwell once declared.

Considering statements like these, it is no surprise that one day he decided to take what he wanted from his employees' pension fund to prop up his failing business empire.

As the pension holders fought for compensation, legislators considered how best to reduce the chance of this happening again.

Now that the DTI report has been published, the question still remains whether there are enough checks and balances in place to ensure that no one can steal money from the 119,000 active pension schemes in the UK.

Loss of faith

Many people lost faith in company pension schemes after 1991, when Robert Maxwell was found to have stolen more than 400m from 32,000 scheme members.

You can never give an absolute guarantee especially when you are dealing with a determined criminal

Nick Edmans, Occupational Pensions Regulatory Authority

A House of Commons select committee, chaired by Frank Field, called for widespread reform of pensions law, blaming city watchdogs and professional advisers for failing to see what was happening.

Many investment banks, lawyers and accountants failed to question Maxwell on irregularities in the way he did business, in part because they accepted his word.

The DTI report makes several recommendations for ensuring that it does not happen again.

It recommends placing severe sanctions on companies which do not report fraud and guidance on auditing business empires.

The report concludes that:" The most important lesson from all the events is that high ethical and professional standards must always be put before commercial advantage...The reputation of the financial markets depend on it."

Safeguards

The 1995 Pension Act was put in place, in part to calm fears that something like this could happen again.

Under that Act, if money has been removed dishonestly from a pension scheme, an employer must make sure enough money is put back into the scheme to pay future benefits.

If the employer is insolvent and unable to restore the funds, the pension scheme will be able to claim compensation of up to 90% from the Pensions Compensation Board.

Trustees now have to make sure that no more than 5% of the pension fund's assets are invested in the employer's shares.

If pension fund holders do fear the worst, they can now contact the Occupational Pensions Regulatory Authority (Opra), responsible for ensuring that those who run occupational pension schemes meet their legal obligations.

If Maxwell came back to life, he could do it again

Ken Trench, Maxwell Pensioners Action Group

Scheme auditors and actuaries will have to act as whistle-blowers and tell Opra if they think something is wrong.

Under separate financial services legislation, custody of assets is now regulated, ensuring the activities of those who hold the pension funds is monitored.

No guarantees

Opinions vary as to whether this is too much, too little or the wrong kind of regulation.

Most people agree that what happened with Maxwell could happen again.

"While the government has tightened up trustee management of pension funds, if Maxwell came back to life, he could do it again. It might be a little bit more difficult for him," Ken Trench, former chairman of the Maxwell pensioners action group said.

"You can never give an absolute guarantee especially when you are dealing with a determined criminal," Nick Edmans, a spokesman for Occupational Pensions Regulatory Authority (Opra) said.

The bottom line is that with the Pensions' Compensation Board in place, pension fund holders should - in theory - not remain out of pocket for long.

Too costly?

Some experts argue that the problem with introducing more regulation is that even current regulations cost too much.

They argue that ultimately this cost could harm the pension holder more than it helps them.

The cost of pro-active regulation would be prohibitive, Nick Edmans at Opra - which operates reactively - and it is pension funds which would bear the cost of this regulation.

Already employers are put off offering pensions because of the cost of compliance, the National Association of Pension Funds ( NAPF) argues.

"The 1995 Pensions Act has imposed such heavy burden of regulation on pension schemes that it has been one of the contributing factors to some employers unwillingness to carry on pension schemes," NAPF's Alan Pickering said.

But he admitted that while there may be fewer schemes, these schemes are better run.

Too much?

The Myners' report into institutional investment captured a feeling that some of the Pensions Act measures had been a kneejerk reaction to the Maxwell scandal.

It criticised the Minimum Funding Requirement - introduced to ensure there would be enough money to pay future benefits in case of theft - and called for its abolition, on the grounds that the restrictions placed on where pension funds could invest their money were too narrow.

The Chancellor has accepted its conclusions, and few raised objection to the changes.

Much of this places the ball back in the pension holders court, and like so many areas of consumer rights, the message appears to be that pension holders should really be proactive.

"They should make sure they get a copy of the scheme's annual report and anything in that that doesn't make sense, they should raise it with their trustees," argues National Association of Pension Fund's Alan Pickering.

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