Select committee: Work and Pensions Committee
Conclusion 7
Third Report - Defined benefit pension schemes
Published 26 Mar 2024
Paragraph 70
Addressed to Department for Work and Pensions
Work and Pensions Committee Defined benefit pension schemes All items in this report Report on parliament.uk ↗ Inquiry on parliament.uk ↗
Conclusion (the committee's words)
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 attractive option, it is important to explore ways in which such surplus could be used to the benefit of the sponsoring employer and scheme members, provided member benefits are protected. However, recent experience has demonstrated the volatility of scheme funding levels and we heard the ‘jury is out’ on the extent funding gains have been ‘locked in’. DWP is consulting on what a ‘safe’ funding level threshold would be. However, it acknowledges that other factors are relevant, such as investment risk and the strength of the sponsoring employer. These are among the issues on which the trustees would need to take a judgement, before deciding whether surplus extraction is ‘safe’ in line with their fiduciary duties, so strong governance will also be essential. DWP should conduct an assessment of the regulatory and governance framework that would be needed to ensure member benefits are safe and take steps to mitigate the risks before proceeding.
From: Work and Pensions Committee, Third Report - Defined benefit pension schemes (HC 144), paragraph 70, 26 March 2024
Government response
The government responded to the whole report on 30 April 2025 (deadline 26 May 2024).
Summary written by Accountability Index from the government's response. It is not the government's own words.The government says it has "addressed all of the Committee's recommendations", supporting some DB reforms and committing to consult or respond on others, while declining to make certain changes, such as replacing TPR's PPF objective or offering specific redress to AEAT members.
- On surplus, the government committed on 28 January 2025 to give trustees and sponsoring employers the flexibility to use DB surplus, and says it "will respond formally" to the 'Options for Defined Benefit Schemes' consultation "in the Spring".
- It agrees it is important that regulation does not make schemes too risk averse, but says "we do not believe that TPR's PPF objective is a key factor in employer decision-making", and the review it cites "did not recommend changing this objective".
- On the PPF levy, it announced on 30 January 2025 that it "will consider" giving the PPF Board greater flexibility to adjust the levy. On pre-1997 indexation for PPF and FAS members, it says Ministers "continue to take advice on options" and that it "will provide further detail in due course".
- On governance, it intends to run a public consultation "later this year", including on accreditation and support for lay trustees, and says it is introducing a Superfund authorisation framework in the forthcoming Pension Schemes Bill. On the AEAT scheme it states: "There are no plans to offer specific redress to AEAT members."