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This week we submitted written evidence for the Work and Pensions Select Committee inquiry on defined benefit (DB) pension schemes. The evidence we submitted covered:  

  • Improved overall levels of DB scheme funding which gives greater confidence to scheme members over the security of their promised benefits, and ultimately to the PPF and our levy payers 
  • The challenges that remain for stressed and small schemes, which may struggle to achieve suitable endgame solutions compared to bigger schemes  
  • The important role that consolidation could play for smaller and stressed schemes, and its potential to provide scale and access to best-in-class asset management 
  • Our financial strength brings greater certainty to members, and has allowed us to bring down costs for sponsors (through reduced levy), which has increased focus on our own endgame, including member outcomes 
  • Our unique expertise which means we’re ready to support, and if needed deliver, any suitable solutions to drive better member outcomes in the future. 

Key takeaways  

DB pension schemes collectively stand in a better position today than they’ve done for over a decade. Our modelling suggests overall DB scheme funding should continue to improve.  

Through improved funding, more schemes are finding themselves able to secure members’ benefits with an insurer through a buyout. However, this option isn’t equally available to all schemes. Smaller schemes often face practical issues in doing so and less appetite from insurers who focus on concluding bigger deals. Where we can, we’re using our expertise to find solutions for smaller schemes in this position. Yet, this area requires further consideration to ensure smaller schemes have the same access to endgame solutions as bigger schemes. Given the unique expertise of the PPF - in asset management, pensions administration and winding up and transferring schemes – we’re ready to explore, and if required to actively support, the development of solutions in this area. 

Despite improvements in overall DB pension scheme funding, there’s a small group of stressed schemes that have a mix of poor funding and weak sponsors. We estimate there are around 240 of these schemes. There’s a high risk that these schemes will be unable to reach a secure endgame for their members. We believe the time is right to find better outcomes for these schemes, their members and the PPF.   

You can read our full submission of evidence, here.