Source · Select Committees · Work and Pensions Committee
Third Report - Defined benefit pension schemes
Work and Pensions Committee
HC 144
Published 26 March 2024
Recommendations
2
Acknowledged
Set out future plans to promote retirement income adequacy, especially for open DB schemes.
Recommendation
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 …
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Government Response Summary
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
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14
Acknowledged
Set out plans to ensure every trustee board has at least one accredited member
Recommendation
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 …
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Government Response Summary
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 timetable.
Department for Work and Pensions
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17
Acknowledged
Para 130
Explain the core aim of a public consolidator for pension schemes
Recommendation
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 …
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Government Response Summary
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 core aim.
Department for Work and Pensions
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19
Acknowledged
Para 139
Give the PPF more flexibility in setting its levy rates
Recommendation
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 Summary
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
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Conclusions (5)
3
Conclusion
Acknowledged
Para 35
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 Summary
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 five years.
7
Conclusion
Acknowledged
Para 70
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 Summary
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 employers flexibility to use DB surplus.
12
Conclusion
Acknowledged
Para 101
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 Summary
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.
20
Conclusion
Acknowledged
Para 142
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 Summary
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 the requested consultation.
21
Conclusion
Acknowledged
Para 151
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 Summary
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.