Government consults on pension scheme security

The Department of Social Security has begun consulting over possible changes to the minimum funding requirement (MFR). The MFR was introduced under the 1995 Pensions Act and came into force in April 1997. It was one of several measures intended to improve the protection of pension scheme members following the Maxwell pensions scandal.

However, the MFR has faced criticism from both the pensions industry and from trade unions because it fails to provide a proper guarantee that pension scheme members' rights will be fully protected. Pensions professionals also object to the MFR as they claim that it distorts investment decision-making.

Some of the options under consideration include a modified MFR, the introduction of a form of compulsory mutual insurance, requiring funds to insure against the sponsoring company's insolvency; and setting up a central discontinuance fund to cover all funded, defined benefit occupational schemes.

The consultation period runs to the end of January 2001.