Private Pensions

Esther McVey Excerpts

Monday 19th March 2018 Written Statements

[The Secretary of State for Work and Pensions (Ms Esther McVey)]

Today the Government are publishing a White Paper “Protecting Defined Benefit Pension Schemes” which sets out our proposals to improve confidence in defined benefit pensions. It builds on last year’s Green Paper, “Security and Sustainability in Defined Benefit Pension Schemes”.

As we said when we published the Green Paper, defined benefit schemes are an important pillar of the UK economy. Around £1.5 trillion is invested by about 5,500 schemes. More importantly, these pensions are a key part of many people’s retirement income. There are 10.5 million members in the UK with a defined benefit pension: it is crucially important that the system delivers the retirement income they have saved for over many years of hard work.

We know that the vast majority of employers with these schemes want to do the right thing by their employees. Our 2017 Green Paper examined the evidence around defined benefit scheme affordability, and concluded that the majority of employers can and do fund their schemes appropriately. The responses to the Green Paper supported this. However, to help trustees and employers work even more effectively towards a long-term goal, we are introducing changes to scheme funding. Where employers want the best for their employees, we want to ensure that the system supports this.

However, it is clear that not all employers want to act fairly. At the heart of the White Paper is a strong message for employers tempted to act in a way that is detrimental to their pension scheme. We will not tolerate such behaviour, and will come down heavily on attempts by employers to avoid their responsibilities. We are supporting the Pensions Regulator to be a clearer, quicker and tougher organisation by giving it new and improved powers to gather information and require employer co-operation. Where there is evidence of unscrupulous behaviour, we are introducing measures including a punitive fines regime and, in the most serious cases, a new criminal offence for those who deliberately and recklessly put their pension scheme at risk.

Finally, we are consulting on the legislative framework and accreditation regime for consolidation, providing industry with the opportunity to innovate while ensuring there are robust safeguards in place to protect members’ benefits. This will be the first step in enabling schemes greater opportunities to realise the benefits of scale achieved through consolidation, and will benefit both members and employers.

The White Paper relates only to private sector defined benefit schemes and is not concerned with other types of pension provision, such as public service pension schemes or defined contribution schemes. A response to our consultation on the future of the British Steel Pension Scheme (BSPS) is included in chapter four of the White Paper.

Defined benefit pensions are a subject of great importance to many people, representing their hopes for the future. We are determined to ensure that these hopes are protected. This White Paper is a key step towards a more secure future for members of these schemes.

[HCWS557]