View more on these topics

MPs launch inquiry into DB schemes following BHS collapse

Frank Field MP

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, the Pensions Regulator and previous owner Sir Philip Green over the handling of BHS’s staff pension scheme.

Now the BBC reports the committee will expand its investigation to include the DB market. There are roughly 6,000 plans, the majority of which are in deficit. The only remaining open schemes are in the public sector.

The Government has proposed changing how members of the scheme have their pensions increased, from using RPI inflation to the normally lower CPI inflation.

Field says: “The state of the British Steel pension scheme is further worrying evidence of a wider danger to one of the biggest savings successes in Britain during the last century – occupational pension schemes.

He adds: “The select committees’ in-depth case study on BHS is illustrating how such schemes are already creaking from rising life expectancy and record low returns on capital.

“Pension law and regulation must urgently adapt to the issues of the future, rather than the problems of the past. The whole savings edifice is in danger.”

Field says: “This will be a major inquiry considering radical solutions to one of the great problems of this age.

“The inquiry will consider, amongst other things, radical solutions that could be more easily implemented if real returns on capital rise again.”

Recommended

1

Frank Field writes to Osborne over ‘unstable’ master trusts

Work and Pensions committee chair Frank Field has called on Chancellor George Osborne to introduce new legislation to tackle “unstable master trusts”. In a letter to the Chancellor last week, Field noted the parliamentary committee’s concerns on both master trusts and the effectiveness of The Pensions Regulator. In particular, Field noted that the committee had […]

Ex- BHS boss calls on Frank Field to step down from pensions inquiry

The former owner of BHS has called on Work and Pensions Committee chair Frank Field to resign from his committee’s probe of the collapsed retailer’s pension fund. BHS fell into administration last week, and Sir Phillip Green, who sold the retailer to a group of investors for £1 in 2015, is due to be grilled […]

Guide cover resized

Guide: Johnson Fleming’s managed auto-enrolment service for SMEs

Johnson Fleming has launched its new managed auto-enrolment service, designed to support SME businesses of up to 250 employees. The managed auto-enrolment service is not just about providing businesses with a software system for them to manage themselves, but more about outsourcing the administration of the project and scheme to Johnson Fleming’s auto-enrolment staff.

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

There are 4 comments at the moment, we would love to hear your opinion too.

  1. BHS & TATA were not scandals, so can we dispense with the emotive journalism please. They were the result of firms being forced to become benefit agencies and loosing sight of the day job.

    Understandably there was concern following Maxwell, but it would seem that there was severe overreaction.

    Economics and investment conditions conspired to make DB an Albatross for firms. Governments who are too blinded by their own cushy pensions couldn’t see the wood for the trees or take note of events elsewhere. That General Motors went bust was largely as a result of their underfunded benefits schemes. many UK firms are merely pensions with something tacked on. Just like IAG (British Airways) are a pension scheme that flies planes and BT is also a pension that happens to be in telecoms.

    Sure employees have to be protected, but perhaps the way forward is to protect the employees pro rata the amounts that they themselves have contributed – the firms contributions can also be taken into account. The amounts combined should then be converted into a DC scheme for existing members. For current retirees some kind of buyout arrangement could possibly be arranged. DB is dead and those in Government should not only realise this, but lead from the front with their own arrangements.

    • Martin Martin 31st May 2016 at 4:01 pm

      I absolutely agree. A separate issue would then be how to ‘unbundle’ civil service schemes, which are equally unaffordable. As you say in your follow-up email, it’s a jobs or no jobs argument – the pensions have to reflect that.

  2. PS In the last analysis what is preferable:

    No pension, but a job, or no job and a depleted pension?

  3. Simon Mansell 31st May 2016 at 4:18 pm

    DB schemes were established under certain funding assumptions, long since changed and many as a result of regulatory impositions. It is certainly the case the many DB scheme have become an open cheque book hastening the demise of the employers who established them with medicine being worse for the employees than the disease! Tata is virtually unsalable with the pension rights as they stand. If the private sector were allowed to use public sector methods to value their own liabilities, the FTSE 350 would be completely wiped out. Here we have a regulatory body protecting a dinosaur long since extinct.

Leave a comment