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.”