The Work and Pensions Committee today launches an inquiry that
will review Defined Benefit (DB) pension schemes and the
challenges and opportunities they pose to members, trustees,
employers and the Pensions Regulator (TPR).
DB schemes promise to pay pension benefits based on salary and
length of service. There are around 5,100 UK private sector DB
schemes with around £1.4 trillion in assets.
Around 9.6 million members rely on DB schemes for their expected
retirement income. However, the number of private sector
employees still accruing new DB benefits reduced from 3.5 million
in 2006 to just under 0.9 million in 2021.
In its Saving for Later Life Report, the cross-party Committee
found that people with access to a DB pension were more likely to
be on track for an adequate income in retirement.
Meanwhile, scheme funding levels have improved over the last
year, although the gilts crisis in September revealed weaknesses
in governance and regulation which need to be
addressed.
Chair's comment
Rt Hon Sir MP, Chair of the Work and
Pensions Committee, said:
“The Committee has previously heard from witnesses that DB
schemes were ‘one of the best things our country ever did’,
although many companies have moved away from them since the 1990s
over concerns about cost.
“With the improvement in scheme funding levels over the last
year, now is a good time to investigate whether the regulatory
framework is set up to enable private sector DB schemes to
continue to thrive under good governance and provide positive
outcomes for scheme members. We will also examine the way DBs can
be consolidated or bought out.”
Terms of Reference
The Committee would like to receive written submissions [link to
evidence portal] in answer to questions in the inquiry's terms of
reference. The deadline for submissions is Wednesday, 26
April.
- Is the right regulatory framework in place to enable open DB
schemes to thrive?
- Is there sufficient capacity in the buy-out market to meet
demand from DB schemes? If not, what are the alternatives?
- What should the Pensions Regulator (TPR) do to improve the
quality of trustee boards?
- What, if any, further steps should be taken to encourage DB
scheme consolidation?
- Are there any circumstances in which consolidation should be
mandatory?
- Do the recent improvements in funding levels change the
future role of DB schemes in UK pension provision?
- How should scheme surpluses be treated? For example, should
they remain in the scheme or be shared between employers and
scheme members? Are the issues different for open and closed
schemes?
- What are the implications of improved funding levels for the
Pension Protection Fund?
- Should changes be made to the Pension Protection Fund (PPF),
Financial Assistance Scheme (FAS) or Fraud Compensation Fund
(FCF) to improve outcomes for members?
