Press Release - Occupational Pensions Regulatory Authority
(Opra): Tackling the risks to pension scheme members
6 November 2002
Opra, the UK body responsible for regulating the governance of
work-based pensions, needs to build on its achievements by focusing
more closely on the risks to the members of pension schemes,
according to a report published to Parliament today by Sir John
Bourn, the head of the National Audit Office.
The report concludes that Opra has encouraged better governance
of pension schemes. The number of reports of breaches of pensions
law made to Opra has been falling. And Opra has stepped in to
appoint trustees to pension schemes in difficulties, resulting in
pension scheme members gaining access to £159 million of assets
between 1998/99 and 2001/02. Since 1997 there have only been three
cases serious enough that the Pensions Compensation Board has had
to make compensation payments. Opra’s activities to inform and
educate pension scheme trustees are well regarded, and their work
more generally seems likely to have improved the way schemes are
run.
Opra has had limited information on the effect that its
interventions have had in improving governance and how many schemes
have suffered serious problems. This has constrained its ability to
identify risks to pension scheme members. The report recommends
that Opra should have more detailed information on the schemes it
regulates and on the outcome of its work. Much of Opra’s work has
focused on dealing with reports of breaches that pose a low risk to
scheme members. Some 60 per cent of cases have been of late
payments of pension contributions where the impact on scheme
members is negligible – the payment has often been made by the time
that Opra take action and nearly half of the payments were less
than 10 days late. The report recommends that Opra raise the
threshold for the reporting of breaches of the Pensions Act.
Handling a large number of cases has restricted Opra’s ability
to target more important risks to pension scheme members but Opra
has been improving their targeting processes as their understanding
of the risks has improved. The report recommends, and Opra is
committed to developing, distinct regulatory responses to different
types of scheme.
Finally, Opra has not clearly articulated how its work should
protect pension scheme members. The Pensions Act does not set out
its functions or objectives and Opra’s view of its power has been
restrictive. It is now starting to develop such a statement.
The Department for Work and Pensions are currently considering
wider reform of pensions and pensions regulation and will shortly
publish a green paper on pensions and the final report of the
quinquennial review of Opra. The National Audit Office’s report
recommends that their conclusions and suggestions for improvements
in the way that Opra regulates pensions should inform the decisions
that the Department take.
Sir John Bourn, head of the National Audit Office,
said:
"Opra has achieved much since they were established in
1995. But, as it and the Government now recognise, it needs to move
from handling a large number of small scale reports to focus more
on identifying and mitigating the more serious risks faced by
members of pension schemes. Opra’s enthusiasm for change will be an
important asset during a time of general development in the
regulatory environment for work-based pensions".
Notes for Editors
- Opra is the UK regulator of pension arrangements offered by
employers. It was set up under the Pensions Act 1995, and took up
its full powers in 1997. Opra has a board of nine part-time members
and a part-time chairman, Harriet Maunsell OBE (appointed 1 April
2001). The board members are appointed by the Secretary of State
for Work and Pensions and are from a wide variety of pensions
backgrounds. Opra’s chief executive is Tony Hobman (appointed 24
April 2002). Opra is based in Brighton and is responsible for the
Pension Schemes Registry based in Newcastle.
- There are some 100,000 occupational pension schemes holding
assets totally £770 billion and with 25 million members. Opra’s
statutory role relates to the way these schemes are run and the
security of the assets held. It has no remit or powers to address
the decline in the number of pension schemes open to new members or
changes in the type of benefits that schemes deliver, such as away
from pensions based on final salary.
- The Pensions Compensation Board, established in 1997, helps
occupational schemes which have suffered a reduction in value of
their assets as a result of dishonesty and where the sponsoring
employer is insolvent. The Scheme is funded by a £2 million levy on
occupational schemes made in 1997/98.
- The report identified four main risks to members of work-based
pension schemes: the risk that assets are misappropriated; the risk
that funds are insufficient to provide pension scheme members with
the benefits that they could reasonably expect due to insufficient
contributions to the scheme, inadequate or inappropriate
investment, or the way in which a pension scheme is wound up; that
incorrect benefits are paid to pension scheme members in due
course; and the risk that scheme members lose track of pension
schemes or vice versa. The NAO report on Opra complements other
reports which have examined the wider context of UK pensions,
including the Department for Work and Pensions’ Pensions
Simplification Review and the Quinquennial Review of Opra. In
particular, the Simplification Review concluded that statutory
requirements for pensions should focus on the objective to be
achieved rather than the process needed to achieve it. The report
proposed a "new kind of regulator", more proactive than Opra, to
act as an adviser as well as a regulator, and issue codes of
practice or guidance notes. Opra has started to evolve in line with
these recommendations.
- Press notices and reports are available from the date of
publication on the NAO website at http://www.nao.org.uk/ Hard copies can
be obtained from The Stationery Office on 0845 702 3474.
- The Comptroller and Auditor General, Sir John Bourn, is the
head of the National Audit Office employing some 750 staff. He and
the NAO are totally independent of Government. He certifies the
accounts of all Government departments and a wide range of other
public sector bodies; and he has statutory authority to report to
Parliament on the economy, efficiency and effectiveness with which
departments and other bodies have used their
Press Notice 63/02
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