View more on these topics

Tata pension writedown plan will not be used for other DB schemes

Pensions-savings-retirement-piggy bank

A Government proposal to override pension scheme rules to slash benefits and help save the Port Talbot steel works will not be extended to other schemes.

In a consultation launched today the Department for Work and Pensions four options to manage the British Steel pension scheme’s roughly £700m deficit.

One of these is reducing the rate at which benefits are increased both in retirement and for members yet to start taking an income.

This would allows trustees of the scheme to reduce, or cut entirely, all increases. Trustees say this would eliminate the deficit.

However, experts say the deal would encourage other corporate sponsors of DB schemes to push the Government to override generous schemes to cut the deficit recovery payments they are required to make.

However, the DWP paper says: “The Government has been exploring whether there is more we can do to ensure that the best possible outcomes are secured from the considerable sums being invested in DB pension schemes, including meeting with representatives of pension schemes, employers and the pensions industry.

“However, as set out above, we are also clear there are very specific circumstances surrounding Tata Steel UK and the scheme.

“We are not, therefore, considering extending the proposal beyond the British Stell pension scheme as a specific scheme.”

The Work and Pensions Committee is to launch an inquiry into the problems facing DB schemes.

Hargreaves Lansdown head of retirement policy Tom McPhail says: “The concurrent issues at British Steel have forced policymakers’ hands. It is no longer possible to turn a blind eye to the yawning reality gap that has opened up between the past promises made by employers through their pension schemes, and the funds available today to make good on those promises.

“This issue affects just about everybody, either directly or indirectly; not just as scheme members, employers, trustees and shareholders, it is also relevant to younger employees in defined contribution pensions.

“A huge proportion of employers’ pension spending is currently being diverted into these final salary schemes, at the expense of younger workers who typically receive lower pension funding as a consequence.”

Recommended

4

MPs launch inquiry into DB schemes following BHS collapse

MPs are to launch a new inquiry into the sustainability of thousands of defined benefit schemes as the BHS and Tata Steel scandals draws attention to occupational plans. Committee chair Frank Field has branded the DB funding crisis “one of the great problems of this age”. The Work and Pensions Committee has been grilling trustees, […]

Careful-Research-Business-Finance-Paperwork-700.jpg

CPS: Making DB work in a TEE world is a ‘matter of will’

Shifting to an Isa model for defined benefit pensions would not create the “operational paralysis” some providers fear, according to think-tank the Centre for Policy Studies. In a new report research fellow Michael Johnson suggests how different components of DB schemes could work within a taxed-exempt-exempt model. Johnson has been leading the calls for the […]

Stressed-man-on-phone-angry-700.jpg
6

DB transfer complaints down since pension freedoms

The Financial Ombudsman Service has seen a significant fall in defined benefit transfer complaints since the introduction of the pension freedoms. Experts say the trend is likely to reflect advisers’ cautious approach to DB transfers caused by concerns the advice may later be deemed unsuitable by regulators. The FOS says it received an average of […]

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

There is one comment at the moment, we would love to hear your opinion too.

  1. Barney Cooper 1st June 2016 at 4:36 pm

    So this government is willing to spend taxpayers cash to support a very profitable Indian business but would not do the same for a British company. Bonkers and unjust.

Leave a comment