MPs to examine future of Defined Benefit pension schemes
16 March 2023
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.
Rt Hon Sir Stephen Timms 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 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?
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