Recommendations & Conclusions
23 items
1
Conclusion
Third Report - Defined benefit pension …
Accepted
We welcome that scheme funding has improved substantially since the mid- 2010s. However, the PPF and the ONS have produced different estimates of the extent to which the value of the assets in DB schemes reduced over 2022. The PPF acknowledges that its figures do not fully reflect the effects …
Government response. The ONS, TPR, and PPF have already worked together, publishing a joint statement on December 4, 2024, to clarify differences in their DB pension scheme data. They have also committed to ongoing collaboration.
Department for Work and Pensions
2
Recommendation
Third Report - Defined benefit pension …
Acknowledged
There is sufficient evidence of improvement in the funding position of DB schemes to justify a new policy approach. However, it is imperative that there is no return to a world of deficits. Policy changes therefore need careful thought so that they grasp the opportunities offered by improved funding levels, …
Government response. The government highlights existing measures like the State Pension and automatic enrolment for retirement income adequacy. It states that the second phase of the landmark Pensions Review, announced in July 2024, will explore longer-term changes for security in retirement.
Department for Work and Pensions
3
Conclusion
Third Report - Defined benefit pension …
Acknowledged
Plans for the new DB funding regime were forged in a different era when the vast majority of DB schemes were in deficit and amidst concern that employers were seeking to evade their responsibility to underfunded schemes. Despite significant changes since then—improved funding levels and what these mean for future …
Government response. The government supports the principle of providing Parliament with necessary details for informed decisions and remains committed to positive engagement. It notes the new DB funding code came into effect in September 2024 and will be reviewed within the next …
Department for Work and Pensions
4
Conclusion
Third Report - Defined benefit pension …
Accepted
Open DB schemes help meet two important objectives: providing adequate incomes in retirement and investing in UK productive finance as they have greater capacity for this than closed schemes. Those responsible for running DB schemes have long expressed concerns that the Funding Code would force them to de-risk unnecessarily, increasing …
Government response. The government states that TPR's new funding code includes a specific chapter and guidance for open schemes, and updated covenant guidance was published in December 2024, developed through consultation with open schemes. It commits to monitoring the effectiveness of these …
Department for Work and Pensions
5
Conclusion
Third Report - Defined benefit pension …
Rejected
TPR’s approach to scheme funding has been driven by its objective to protect the PPF. We agree with those who told us that the objective now looks redundant, given the PPF has £12 billion in reserves. Two decades of regulatory policy caution have almost entirely destroyed the UK’s DB system. …
Government response. The government rejects the recommendation to change TPR's objective, stating it does not believe the PPF objective is a key factor in employer decision-making and that an independent review did not recommend this change. It will formally respond to the …
Department for Work and Pensions
6
Conclusion
Third Report - Defined benefit pension …
Accepted
Many trustees and scheme sponsors will want to enter an arrangement to buy-out scheme benefits with an insurer and we welcome the security for scheme members this provides. However, not all will be able to do so, at least in the short-term. Well-funded schemes should also be supported to run …
Government response. The government states that TPR already monitors trends in demand for buy-out and its alternatives through market engagement and modelling. TPR is actively working with the Prudential Regulation Authority (PRA) to manage systemic risk by ensuring trustee preparedness and modelling …
Department for Work and Pensions
7
Conclusion
Third Report - Defined benefit pension …
Acknowledged
We note the further consultation launched in February on options to support DB schemes. Given that the aim of the funding regime is for schemes to be well-funded when they are significantly mature, some will be in surplus. We agree that if running a scheme on is to be an …
Government response. The government states that DWP is actively assessing the regulatory and governance framework and will continue to engage with TPR and stakeholders as it develops policy on surplus flexibilities. On January 28, 2025, it committed to giving trustees and sponsoring …
Department for Work and Pensions
8
Conclusion
Third Report - Defined benefit pension …
Rejected
We remain to be convinced that the PPF underpin would be an effective incentive to trustees to consider increasing their investment risk. DWP and TPR should consider whether there are changes to the funding regime that could give trustees confidence to take appropriate investment risk. (Paragraph 74) 56 Defined benefit …
Government response. The government states that trustees already have significant flexibility for investment risk within the current regime and is not persuaded that merely allowing more risk would be sufficient. It highlights the 'Options for Defined Benefit schemes' consultation, exploring changing incentives, …
Department for Work and Pensions
9
Conclusion
Third Report - Defined benefit pension …
Accepted
Some pension scheme members are dependent on discretionary increases to ensure their pension payments keep up with the cost of living. Where these have not been awarded the effect has been, over time, to erode their standard of living. This can be particularly the case for those with rights built …
Government response. TPR has already undertaken the recommended research on discretionary increases for pre-1997 benefits through its Defined Benefit 2024 survey, with specific findings published on March 25, 2025. The research provides data on schemes allowing and providing these benefits, as requested.
Department for Work and Pensions
10
Conclusion
Third Report - Defined benefit pension …
Deferred
Improvements in scheme funding have given new prominence to the question of how to treat any surplus in the best interests of scheme beneficiaries. For example, there may be discretion after benefits have been secured on buy-out to enhance benefits before returning any remaining surplus to the employer. There may …
Government response. The government acknowledges concerns about member interests regarding surplus treatment and discretionary increases, noting existing TPR guidance for trustees. It commits to running a public consultation later this year to explore further changes in the area of trustee capability and …
Department for Work and Pensions
11
Recommendation
Third Report - Defined benefit pension …
Accepted
We welcome confirmation from TPR and Ministers that the interests of pension savers are paramount and that investment decisions are for trustees in line with their fiduciary duties to act in the best interest of scheme beneficiaries. The Government should continue to work with the industry to create an environment …
Government response. The government committed to legislating for a legislative authorisation regime for Superfund consolidators, with a consultation response this spring and the final Pension Investment Review report in Spring 2025 before legislation in the Pension Schemes Bill.
Department for Work and Pensions
12
Conclusion
Third Report - Defined benefit pension …
Acknowledged
The use of sole trustees is increasing. While they can bring knowledge and expertise, there is the potential for conflicts of interest. We are concerned that employers often have a unilateral power to appoint sole trustees in the place of the existing trustee board, including member nominated trustees. DWP should …
Government response. The government acknowledged concerns regarding sole trustees and existing safeguards, committing to consult on what, if any, further action might be needed in the future, rather than introducing specific measures or member involvement now.
Department for Work and Pensions
13
Conclusion
Third Report - Defined benefit pension …
Deferred
Despite strong support from TPR and trustee bodies for accreditation as a way to improve governance standards, they can only encourage it. DWP should set a date by which it intends to make accreditation mandatory for professional trustees.
Government response. The government did not set a date for mandatory accreditation, instead stating that voluntary accreditation is prevalent and it intends to consult on the framework of accreditation and governance later this year.
Department for Work and Pensions
14
Recommendation
Third Report - Defined benefit pension …
Acknowledged
Member-nominated trustees play a vital role in representing the interests of scheme members and providing a link to the workforce. As part of its planned engagement with stakeholders, DWP should explore ways to support lay trustees with the time and costs needed to become accredited and report the results. It …
Government response. The government committed to planning a consultation later this year to consider how TPR and DWP could provide additional support for lay trustees, but did not set out plans for ensuring every trustee board has an accredited member or a …
Department for Work and Pensions
15
Recommendation
Third Report - Defined benefit pension …
Accepted
We welcome the introduction of a trustee register as a way to improve TPR oversight of trustees and to communicate directly with them. We also welcome TPR’s decision to update the Trustee toolkit. We recommend that TPR should use the register to report annually on the number of trustees who …
Government response. The government committed that once the trustee register is fully operational, it should be possible to publish anonymised aggregated data, including the number of trustees who have completed the toolkit.
Department for Work and Pensions
16
Recommendation
Third Report - Defined benefit pension …
Accepted
TPR sees consolidation, including through Superfunds, as one of the main ways to improve governance, providing advantages of scale in terms of investment and governance. The Government committed to legislating for this in Mansion House as did DWP’s 2023 response to the consultation on pension Superfunds but there was no …
Government response. The government committed to introducing provisions for a dedicated authorisation and supervision framework for Superfunds in the forthcoming Pension Schemes Bill, with anticipated regulations to be consulted upon for further details.
Department for Work and Pensions
17
Recommendation
Third Report - Defined benefit pension …
Acknowledged
There may be a good case for a public consolidator. However, there are complex issues to address, particularly in relation to who would underwrite the risk, the impact on member benefits and how its introduction would be justified. In response to this report, the Government should explain whether the core …
Government response. The government stated it is exploring whether a small, focused Government Consolidator could be an option for schemes less attractive to commercial providers, and will respond to a consultation on this in the spring, but did not definitively explain its …
Department for Work and Pensions
18
Conclusion
Third Report - Defined benefit pension …
Accepted
Given the improvements in scheme funding, trustees must ensure they secure benefits for members, be that through consolidation, buy-out or letting schemes run on. TPR should be proactive in encouraging trustees to assess the potential costs and benefits of different options rather than assuming this assessment is taking place. TPR …
Government response. The government explained that the Occupational Pension Schemes (Funding and Investment Strategy and Amendment) Regulations 2024 will require schemes to submit a statement of strategy to TPR, which includes trustees' assessment of their approach and reflections on key decisions.
Department for Work and Pensions
19
Recommendation
Third Report - Defined benefit pension …
Acknowledged
The Government should find an early legislative opportunity to give the PPF more flexibility in how it sets the levy, allowing it to reduce it to zero and then increase it again if necessary.
Government response. The government announced it will consider giving the Board of the PPF greater flexibility to adjust the annual pension protection levy, aiming to reduce costs for levy payers, but did not commit to specific legislative action or a timeline.
Department for Work and Pensions
20
Conclusion
Third Report - Defined benefit pension …
Acknowledged
We applaud the fact that the PPF is now reasonably confident that it has the funds it needs to meet potential claims on it. This is a significant achievement. There is now an opportunity to consider how the £12 billion in PPF reserves can be used to the benefit of …
Government response. The government noted the PPF's reduced levy estimate and new rule provision for a zero levy pending legislative changes, and committed to considering and reflecting on feedback regarding compensation levels and pre-97 indexation, but did not commit to bringing forward …
Department for Work and Pensions
21
Conclusion
Third Report - Defined benefit pension …
Acknowledged
Non-indexation of pre-1997 benefits has had a significant impact on PPF members and disproportionately on older members and women, reducing the value of their compensation in real terms. Given the £12 billion in PPF reserves, the potential impact on levy payers is no justification for continuing this policy. We welcome …
Government response. The government acknowledges the issues raised by PPF and FAS members regarding pre-1997 indexation, states it is taking advice on options, and will continue to work with the PPF to balance stakeholder interests.
Department for Work and Pensions
22
Recommendation
Third Report - Defined benefit pension …
Rejected
Financial Assistance Scheme (FAS) members are likely to have more of their service before 1997, so are particularly likely to be affected by non-indexation of pre-1997 benefits. Any improvements for PPF members should also apply to FAS members. Given the age of many FAS members, the Government should legislate as …
Government response. The government states it is considering how to address the lack of pre-1997 indexation for FAS members. However, it explicitly rejects awarding interest on arrears due to no legal basis and rejects removing the FAS compensation cap due to significant …
Department for Work and Pensions
23
Recommendation
Third Report - Defined benefit pension …
Rejected
We support the recommendation of the Public Accounts Committee that the Government should “ensure that members’ complaints about the AEAT pension case can be independently reviewed, for example by a relevant ombudsman.” We agree with the Pensions Minister that it is important for a sense of justice and fairness that …
Government response. The government rejects the recommendation, stating that the AEAT case has been extensively investigated over the last ten years by various bodies, and there are no plans to offer specific redress to AEAT members.
Department for Work and Pensions