THE WHOLE subject of pensions is in national focus as never before as

a result of the Maxwell scandal.

The Government has instituted a committee of inquiry under Professor

Roy Goode to investigate the legal and regulatory framework of

occupational pension schemes, and to report within a year.

While the Government will no doubt act on the Goode Committee's

recommendations, its actions so far to counter the effect of the missing

Maxwell pension money have smacked more of damage limitation.

It has provided #2.5m to help maintain pensions in payment, and

established a trust under Sir John Cuckney to try to persuade those in

the pensions industry and advisers who benefited from Mr Maxwell's

empire-building to help make up the missing money.

More important, it is implementing the provision in the Social

Security Act, 1990, which makes a company liable for any deficiency in

its pension fund.

The Commons Social Security Committee has already had a crack at

suggesting changes to pension regulations, and its views will no doubt

be considered by the Goode Committee.

The nub of the problem is that it is not certain exactly who the

assets of the fund belong to -- the employees and pensioners, or the

employer, or both. The trust laws governing this date back to the Middle

Ages and urgently need updating. The trustees' duty is to the

pensioners, present and future, but in practice the firm's directors

often make up the majority of them.

Furthermore, the distinction between the firm's money and the fund's

has become blurred. Pension contribution holidays by firms taking

advantage of an actuarial surplus in their pension funds are a common

occurrence, and takeover bids have been partly financed through the

bidder company absorbing the surplus in the target company's fund. So

the employer has a financial interest in the fund.

The existing Occupational Pensions Board is supposed to have a

watching brief over company pension schemes, but has so far been pretty

ineffective, partly through lack of adequate funding. The committee

proposed that the board be beefed up to take a more active supervisory

role, particularly to authorise trustees.

However this would present a formidable logistical task, given that

there are 400,000 company schemes operating at present. There would also

be the sheer difficulty of finding suitable candidates in sufficient

numbers.

The problem could be overcome by using more employee and union

representatives who would at least be independent of the employer so

long as they were not intimidated by him -- as they would have been had

Mr Maxwell been their employer.

This might at least enable employees and pensioners to get more

information about their fund. Stonewalling or patronising condescension

has too often been the reaction of trustees to requests for information.

The committee said that funds should be required to produce annual

reports within seven months of the end of their ficancial year, giving

details of the assets of the fund and where they are held, to hold an

annual meeting for members to attend, and to supply members with audited

statements of their personal stake in the fund.

When members know this, the pressure will be on to improve transfer

values, as at present employees who remain with the same company to

retirement are subsidised by early leavers.

The committee had several recommendations for auditors. It suggested

that the fund's auditors should be different from the auditors used for

the firm's accounts and that they be obliged to get independent

verification for the information which has to be supplied for the fund

to be approved by the Occupational Pensions Board. All this seems

sensible but there are problems.

For example, a single auditor for both the company and the pension

scheme is more likely to spot malpractice by the company. Auditors are

likely to be unhappy about assuming a regulatory as well as supervisory

role.

No-one seriously questions the need for revamped pension laws, but

there is a worry in the industry that in their eagerness to ensure the

looting of a pension fund by an unscrupulous employer can never happen

again, legislators will propose draconian powers for the regulators

which might persuade employers, who already face a considerable

administrative burden from their pension schemes, to opt out or

institute money purchase plans.

At the end of the day the vast majority of schemes are honestly, even

if not always competently, run and it might be impossible to provide a

cast-iron guarantee that a determined criminal can never again defraud a

pension fund.