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PLSA says 'affordability challenges' more significant, in response to DB Green Paper

Thursday, May 18, 2017

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The Pensions and Lifetime Savings Association (PLSA) has published its response to the Department of Work and Pensions (DWP) Green Paper on Defined Benefit (DB) schemes

In preparation for its response to the Security and Sustainability in Defined Benefit Pensions Schemes Green Paper, PLSA consulted with its members and found that 'affordability challenges' facing both schemes and employers are much more significant than the position set out in the paper.

Graham Vidler, director of external affairs, at the PLSA, said the Green Paper will start the process of getting DB back on track.

He said: "Millions of people in the UK rely on defined benefit pensions for a significant proportion of their retirement income, but the system faces a major funding challenge that needs to be addressed.

Vidler said the focus on improving scheme governance and member protection is particularly important and PLSA supports a proportional strengthening of the Regulator's powers to intervene where corporate action may put members' interests at risk.

He said: "We would also support further emphasis on making improvements to both the governance and structure of DB schemes."

"The regulatory focus needs to shift from outputs to inputs, regulating for strong governance through the encouragement of strong, diverse governing bodies.

"Strong governance is also one of the many benefits of consolidation and we welcome the Government's recognition of the need to increase scale in the sector."

Pensions and benefits consultancy Hymans Robertson said the main issue facing UK DB schemes is risk, and its response to the Green Paper reflects that.

Calum Cooper, head of trustee DB, at Hymans Robertson, said: "The DWP's view that DB schemes are generally affordable is absolutely right, so focussing on cost efficiency, while important, is not obviously the number one driver for the industry.

"Instead, it is vital we recognise the cost of running unnecessary risk - each year there is still £423bn p.a. of risk in the system."

First published 18.05.2017

Lindsay.sharman@wilmingtonplc.com