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DWP launches DB Green Paper

23 February 2017

Image for DWP launches DB Green Paper

The Department for Work and Pensions launched a consultation into Defined Benefit (DB) pensions this week.

The Green Paper will consider the powers of The Pensions Regulator and encourage debate around striking the balance between the needs and aspirations of sponsoring employers, members, and Pension Protection Fund, and the wider economy - with the aim of ensuring no one group is unfairly disadvantaged.

Member protection, funding and investment, scheme affordability and consolidation will be reviewed as part of the consultation.

Minister for Pensions, Richard Harrington, said the public needs to have confidence in pensions.

"With recent high profile cases highlighting the risks inherent in defined benefit pensions, we want to ensure that these important pension schemes remain sustainable for the future and that the right protections are in place for members," he said.

Over the coming months, he said, the DWP will work closely with the pensions industry, employers and scheme members, to see what more can be done to increase confidence in defined benefit pensions.

"While there is no evidence of a systematic issue, we recognise that recent high profile cases have raised concerns regarding pensions and is looking to improve confidence in the sector and hear from a wide range of experts, employers and consumers about what action or support could be put in place."

The consultation has been welcomed by the Pensions and Lifetime Savings Association (PLSA).

Graham Vidler, PLSA director of public affairs, said the Green Paper asks the necessary questions to move forward the debate.

"Last year the interim report from our taskforce identified how the challenges facing DB are posing a material risk to members' benefits, to employers, and the wider economy," he said.

Nick Griggs, partner and head of corporate consulting at Barnett Waddingham LLP, said DB schemes must adapt to survive and welcomed the Government's attempt to engage with the industry.

"An open defined benefit (DB) scheme is now so rare perhaps, in the words of Indiana Jones, it belongs in a museum," he said.

"The environment in which these schemes were set up was very different to today - although the current level of contributions required to fund DB schemes can, in theory, be paid by most employers without risking insolvency, for a significant number it is having a big impact on their future investment plans and the amount employers are doing to support current employees in saving for their retirement."

First published 23.02.2017

Lindsay.sharman@wilmingtonplc.com