Defined benefit (DB) schemes and the protection system in place for members are working despite recent high profile failures such as Carillion, according to the pensions and financial inclusion minister.
Guy Opperman urged the pensions industry not to jump to conclusions and assume the system is “broken”.
Speaking at an Association of Member Nominated Trustee conference on 28 February, he said: “I accept high-profile corporate failures such as Carillion do not help the perception of the DB system. But I want to make it very clear that, for the vast majority of DB schemes, the pension protection system is working as intended.”
Opperman said The Pensions Regulator (TPR) has a tough job overseeing nearly 6,000 DB schemes and must effectively balance protecting member benefits and taking care of employers, while inhibiting unsustainable approaches.
“That is a very challenging role, and she [TPR chief executive Lesley Titcomb] has my full support,” he continued. “The regulator can use its current powers to protect member benefits and we are seeing examples of that, such as with the case of Dominic Chappell.”
The former BHS owner was last week ordered to pay moer than £87,000 in fines and court costs after he was found guilty of failing to provide TPR with information under its section 72 powers.
Opperman further added that, despite strengths of the DB system, there will still be employers willing to put schemes at risk: “The government is determined to protect members benefits and will not stand for employers making decisions which will harm DB pension schemes.”
DB white paper
Commenting on the forthcoming DB white paper – which is expected to be published before May – Opperman said the government will “set up our ambition to ensure the system works well now and for the future by building on measures, and introducing new measures, to trustees, employers and the regulator”.
The Department for Work and Pensions’ (DWP) much-anticipated white paper will explore the consolidation of DB schemes as well as additional powers for TPR. The watchdog has requested upgrades to its information-gathering and contribution-setting powers. However, any action arising from the white paper is unlikely to be legislated for before 2020.
Opperman said: “The government’s intention on DB measures is clear. Where the employer can, they must meet responsibilities. We will give TPR new powers to get even tougher when they need to respond quickly when they believe wrong doings are taking place.”
He added that while it is important to protect members’ benefits, it must not be done at the expense of letting businesses and current employees suffer disproportionately.
“There needs to be a balanced DB system which must protect members’ benefits sufficiently but also allow for sustainable business growth.”