Defined benefit pension schemes

Work and Pensions Committee Closed Inquiry
Opened: 16 Mar 2023 Closed: 5 May 2024 Parliament page
Defined benefit (DB) pension schemes promise to pay pension benefits based on salary and length of service. There are over 5,100 UK private sector DB schemes, with around £1.4 trillion in assets. DB schemes are in decline in the private sector. The number of private sector employees still accruing new … Read more
9 Recommendations
14 Conclusions
1 Report
6 Oral sessions
15 Letters
6 Events
Activity timeline 29 events
30 Apr
2025
Report published
4 Dec
2024
Correspondence
26 Mar
2024
Report published
13 Mar
2024
Correspondence
6 Mar
2024
Correspondence
7 Feb
2024
Correspondence
31 Jan
2024
Correspondence
24 Jan
2024
Correspondence
10 Jan
2024
Oral evidence
10 Jan
2024
Correspondence
10 Jan
2024
Correspondence
10 Jan
2024
Correspondence
Oral evidence sessions 6 sessions
10 Jan 2024
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Work and Pensions Committee
Bim Afolami · HM Treasury Fiona Frobisher · The Pensions Regulator Katie Farrington · Department for Work and Pensions Laura Webster · HM Treasury Neil Couling · Department for Work and Pensions Paul Maynard · Department for Work and Pensions Peter Schofield · Department for Work and Pensions
29 Nov 2023
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Work and Pensions Committee
Louise Davey · The Pensions Regulator Nausicaa Delfas · Financial Ombudsmen Service Neil Bull · The Pensions Regulator
8 Nov 2023
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Work and Pensions Committee
Barry Kenneth · Pension Protection Fund Neil Walsh · Prospect Oliver Morley · Money and Pensions Service Richard Nicholl · Pensions Action Group Roger Sainsbury · Deprived Pensioners Association Sara Protheroe · Pension Protection Fund Terry Monk · Pensions Action Group
18 Oct 2023
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Work and Pensions Committee
David Carson · Hewlett Packard Pension Association (HPPA) Harus Rai · Capital Cranfield Janice Turner · Association of Member Nominated Trustees Leonard Bowman · Hymans Robertson Nick Coleman · BP Pensioner Group Robert Smith · Royal Ordnance Pensioners Association Steve Hitchiner · Society of Pension Professionals
6 Sep 2023
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Work and Pensions Committee
Adam Saron Brian Denyer · Abrdn Luke Webster · The Pension Superfund Serkan Bektas · Insight Investment Simon True · Clara-Pensions Limited Tracy Blackwell · Pension Insurance Corporation plc Yvonne Braun · ABI
21 Jun 2023
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Work and Pensions Committee
Dr Con Keating · Brighton Rock Group Joe Dabrowski · Pension and Lifetime Savings Association Leah Evans · Institute and Faculty of Actuaries Mr Derek Benstead · First Actuarial LLP Mr John Ralfe Mr Martin Hunter · Railpen Professor Iain Clacher · University of Leeds Sir Steve Webb · Lane, Clark & Peacock
Title HC No. Published Items Response
Third Report - Defined benefit pension schemes HC 144 26 Mar 2024 23 Responded
Recommendations & Conclusions
23 results
1 Conclusion Accepted
Third Report - Defined benefit pen…
We welcome that scheme funding has improved substantially since the mid- 2010s.
We welcome that scheme funding has improved substantially since the mid- 2010s. However, the PPF and the ONS have produced different estimates of the extent to which the value of the assets in DB schemes reduced over 2022. The PPF … Read more
Government Response
The ONS, TPR, and PPF have already worked together, publishing a joint statement on December 4, 2024, to clarify differences in their DB pension scheme data. They have also committed to ongoing collaboration.
Department for Work and Pensions
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2 Recommendation Acknowledged
Third Report - Defined benefit pen…
Set out future plans to promote retirement income adequacy, especially for open DB schemes.
There is sufficient evidence of improvement in the funding position of DB schemes to justify a new policy approach. However, it is imperative that there is no return to a world of deficits. Policy changes therefore need careful thought so … Read more
Government Response
The government highlights existing measures like the State Pension and automatic enrolment for retirement income adequacy. It states that the second phase of the landmark Pensions Review, announced in July 2024, will explore longer-term changes for security in retirement.
Department for Work and Pensions
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3 Conclusion Acknowledged
Third Report - Defined benefit pen…
Commit to ensuring Parliament receives full material details for informed judgment on legislation.
Plans for the new DB funding regime were forged in a different era when the vast majority of DB schemes were in deficit and amidst concern that employers were seeking to evade their responsibility to underfunded schemes. Despite significant changes … Read more
Government Response
The government supports the principle of providing Parliament with necessary details for informed decisions and remains committed to positive engagement. It notes the new DB funding code came into effect in September 2024 and will be reviewed within the next five years.
Department for Work and Pensions
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4 Conclusion Accepted
Third Report - Defined benefit pen…
Work with open DB schemes to address funding code concerns and report back to Parliament.
Open DB schemes help meet two important objectives: providing adequate incomes in retirement and investing in UK productive finance as they have greater capacity for this than closed schemes. Those responsible for running DB schemes have long expressed concerns that … Read more
Government Response
The government states that TPR's new funding code includes a specific chapter and guidance for open schemes, and updated covenant guidance was published in December 2024, developed through consultation with open schemes. It commits to monitoring the effectiveness of these new regulations and guidance.
Department for Work and Pensions
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5 Conclusion Rejected
Third Report - Defined benefit pen…
Replace TPR's PPF protection objective with protecting future and past pension service benefits.
TPR’s approach to scheme funding has been driven by its objective to protect the PPF. We agree with those who told us that the objective now looks redundant, given the PPF has £12 billion in reserves. Two decades of regulatory … Read more
Government Response
The government rejects the recommendation to change TPR's objective, stating it does not believe the PPF objective is a key factor in employer decision-making and that an independent review did not recommend this change. It will formally respond to the 'Options for Defined Benefit Schemes' consultation in the Spring.
Department for Work and Pensions
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6 Conclusion Accepted
Third Report - Defined benefit pen…
Monitor trends in pension scheme buy-out demand and alternatives, working with financial regulators.
Many trustees and scheme sponsors will want to enter an arrangement to buy-out scheme benefits with an insurer and we welcome the security for scheme members this provides. However, not all will be able to do so, at least in … Read more
Government Response
The government states that TPR already monitors trends in demand for buy-out and its alternatives through market engagement and modelling. TPR is actively working with the Prudential Regulation Authority (PRA) to manage systemic risk by ensuring trustee preparedness and modelling future demand.
Department for Work and Pensions
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7 Conclusion Acknowledged
Third Report - Defined benefit pen…
Conduct an assessment of the regulatory framework for safe member benefits before surplus extraction.
We note the further consultation launched in February on options to support DB schemes. Given that the aim of the funding regime is for schemes to be well-funded when they are significantly mature, some will be in surplus. We agree … Read more
Government Response
The government states that DWP is actively assessing the regulatory and governance framework and will continue to engage with TPR and stakeholders as it develops policy on surplus flexibilities. On January 28, 2025, it committed to giving trustees and sponsoring employers flexibility to use DB surplus.
Department for Work and Pensions
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8 Conclusion Rejected
Third Report - Defined benefit pen…
Consider funding regime changes to increase trustee confidence in taking appropriate investment risk.
We remain to be convinced that the PPF underpin would be an effective incentive to trustees to consider increasing their investment risk. DWP and TPR should consider whether there are changes to the funding regime that could give trustees confidence … Read more
Government Response
The government states that trustees already have significant flexibility for investment risk within the current regime and is not persuaded that merely allowing more risk would be sufficient. It highlights the 'Options for Defined Benefit schemes' consultation, exploring changing incentives, and commits to respond later this year.
Department for Work and Pensions
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9 Conclusion Accepted
Third Report - Defined benefit pen…
Undertake research on pension schemes' discretionary increases for pre-1997 benefits and reasons for non-payment.
Some pension scheme members are dependent on discretionary increases to ensure their pension payments keep up with the cost of living. Where these have not been awarded the effect has been, over time, to erode their standard of living. This … Read more
Government Response
TPR has already undertaken the recommended research on discretionary increases for pre-1997 benefits through its Defined Benefit 2024 survey, with specific findings published on March 25, 2025. The research provides data on schemes allowing and providing these benefits, as requested.
Department for Work and Pensions
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10 Conclusion Deferred
Third Report - Defined benefit pen…
Explore ways to meet pension scheme members’ expectations for benefit enhancement
Improvements in scheme funding have given new prominence to the question of how to treat any surplus in the best interests of scheme beneficiaries. For example, there may be discretion after benefits have been secured on buy-out to enhance benefits … Read more
Government Response
The government acknowledges concerns about member interests regarding surplus treatment and discretionary increases, noting existing TPR guidance for trustees. It commits to running a public consultation later this year to explore further changes in the area of trustee capability and governance.
Department for Work and Pensions
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11 Recommendation Accepted
Third Report - Defined benefit pen…
Continue working with industry to create an environment supporting UK economy investment
We welcome confirmation from TPR and Ministers that the interests of pension savers are paramount and that investment decisions are for trustees in line with their fiduciary duties to act in the best interest of scheme beneficiaries. The Government should … Read more
Government Response
The government committed to legislating for a legislative authorisation regime for Superfund consolidators, with a consultation response this spring and the final Pension Investment Review report in Spring 2025 before legislation in the Pension Schemes Bill.
Department for Work and Pensions
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12 Conclusion Acknowledged
Third Report - Defined benefit pen…
Introduce measures to improve sole trustee accountability and member involvement in appointments
The use of sole trustees is increasing. While they can bring knowledge and expertise, there is the potential for conflicts of interest. We are concerned that employers often have a unilateral power to appoint sole trustees in the place of … Read more
Government Response
The government acknowledged concerns regarding sole trustees and existing safeguards, committing to consult on what, if any, further action might be needed in the future, rather than introducing specific measures or member involvement now.
Department for Work and Pensions
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13 Conclusion Deferred
Third Report - Defined benefit pen…
Set a date for mandatory accreditation of professional pension trustees
Despite strong support from TPR and trustee bodies for accreditation as a way to improve governance standards, they can only encourage it. DWP should set a date by which it intends to make accreditation mandatory for professional trustees.
Government Response
The government did not set a date for mandatory accreditation, instead stating that voluntary accreditation is prevalent and it intends to consult on the framework of accreditation and governance later this year.
Department for Work and Pensions
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14 Recommendation Acknowledged
Third Report - Defined benefit pen…
Set out plans to ensure every trustee board has at least one accredited member
Member-nominated trustees play a vital role in representing the interests of scheme members and providing a link to the workforce. As part of its planned engagement with stakeholders, DWP should explore ways to support lay trustees with the time and … Read more
Government Response
The government committed to planning a consultation later this year to consider how TPR and DWP could provide additional support for lay trustees, but did not set out plans for ensuring every trustee board has an accredited member or a timetable.
Department for Work and Pensions
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15 Recommendation Accepted
Third Report - Defined benefit pen…
Use the trustee register to report annually on toolkit completion rates
We welcome the introduction of a trustee register as a way to improve TPR oversight of trustees and to communicate directly with them. We also welcome TPR’s decision to update the Trustee toolkit. We recommend that TPR should use the … Read more
Government Response
The government committed that once the trustee register is fully operational, it should be possible to publish anonymised aggregated data, including the number of trustees who have completed the toolkit.
Department for Work and Pensions
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16 Recommendation Accepted
Third Report - Defined benefit pen…
Introduce primary legislation for pension Superfunds after consulting on framework details
TPR sees consolidation, including through Superfunds, as one of the main ways to improve governance, providing advantages of scale in terms of investment and governance. The Government committed to legislating for this in Mansion House as did DWP’s 2023 response … Read more
Government Response
The government committed to introducing provisions for a dedicated authorisation and supervision framework for Superfunds in the forthcoming Pension Schemes Bill, with anticipated regulations to be consulted upon for further details.
Department for Work and Pensions
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17 Recommendation Acknowledged
Third Report - Defined benefit pen…
Explain the core aim of a public consolidator for pension schemes
There may be a good case for a public consolidator. However, there are complex issues to address, particularly in relation to who would underwrite the risk, the impact on member benefits and how its introduction would be justified. In response … Read more
Government Response
The government stated it is exploring whether a small, focused Government Consolidator could be an option for schemes less attractive to commercial providers, and will respond to a consultation on this in the spring, but did not definitively explain its core aim.
Department for Work and Pensions
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18 Conclusion Accepted
Third Report - Defined benefit pen…
Require pension schemes to justify their chosen approach and member benefits
Given the improvements in scheme funding, trustees must ensure they secure benefits for members, be that through consolidation, buy-out or letting schemes run on. TPR should be proactive in encouraging trustees to assess the potential costs and benefits of different … Read more
Government Response
The government explained that the Occupational Pension Schemes (Funding and Investment Strategy and Amendment) Regulations 2024 will require schemes to submit a statement of strategy to TPR, which includes trustees' assessment of their approach and reflections on key decisions.
Department for Work and Pensions
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19 Recommendation Acknowledged
Third Report - Defined benefit pen…
Give the PPF more flexibility in setting its levy rates
The Government should find an early legislative opportunity to give the PPF more flexibility in how it sets the levy, allowing it to reduce it to zero and then increase it again if necessary.
Government Response
The government announced it will consider giving the Board of the PPF greater flexibility to adjust the annual pension protection levy, aiming to reduce costs for levy payers, but did not commit to specific legislative action or a timeline.
Department for Work and Pensions
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20 Conclusion Acknowledged
Third Report - Defined benefit pen…
Bring forward promised consultation on PPF levy changes and compensation levels for scheme members
We applaud the fact that the PPF is now reasonably confident that it has the funds it needs to meet potential claims on it. This is a significant achievement. There is now an opportunity to consider how the £12 billion … Read more
Government Response
The government noted the PPF's reduced levy estimate and new rule provision for a zero levy pending legislative changes, and committed to considering and reflecting on feedback regarding compensation levels and pre-97 indexation, but did not commit to bringing forward the requested consultation.
Department for Work and Pensions
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21 Conclusion Acknowledged
Third Report - Defined benefit pen…
Legislate to provide indexation on pre-1997 PPF compensation rights and review post-1997 cap
Non-indexation of pre-1997 benefits has had a significant impact on PPF members and disproportionately on older members and women, reducing the value of their compensation in real terms. Given the £12 billion in PPF reserves, the potential impact on levy … Read more
Government Response
The government acknowledges the issues raised by PPF and FAS members regarding pre-1997 indexation, states it is taking advice on options, and will continue to work with the PPF to balance stakeholder interests.
Department for Work and Pensions
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22 Recommendation Rejected
Third Report - Defined benefit pen…
Legislate urgently to provide indexation on FAS compensation for pre-1997 rights, funded by taxpayer
Financial Assistance Scheme (FAS) members are likely to have more of their service before 1997, so are particularly likely to be affected by non-indexation of pre-1997 benefits. Any improvements for PPF members should also apply to FAS members. Given the … Read more
Government Response
The government states it is considering how to address the lack of pre-1997 indexation for FAS members. However, it explicitly rejects awarding interest on arrears due to no legal basis and rejects removing the FAS compensation cap due to significant cost implications for the Exchequer.
Department for Work and Pensions
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23 Recommendation Rejected
Third Report - Defined benefit pen…
Ensure adequate independent redress mechanism for AEAT pension scheme members' complaints
We support the recommendation of the Public Accounts Committee that the Government should “ensure that members’ complaints about the AEAT pension case can be independently reviewed, for example by a relevant ombudsman.” We agree with the Pensions Minister that it … Read more
Government Response
The government rejects the recommendation, stating that the AEAT case has been extensively investigated over the last ten years by various bodies, and there are no plans to offer specific redress to AEAT members.
Department for Work and Pensions
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Government Response AI assessment · 23 of 9 classified
Accepted 8
Acknowledged 9
Deferred 2
Rejected 4
Total 9 recs + 14 conclusions
Correspondence 15 letters
4 Dec 2024 Statement from the Office of National Statistics (ONS), the Pensions Regulator (TPR) and the Pension Protection Fund (PPF) on valuing the assets in Defined Benefit (DB) pension schemes
Parliament page
13 Mar 2024 Correspondence with The Pensions Regulator relating to the impact on Defined benefit pension schemes after the LDI episode
Parliament page
6 Mar 2024 Correspondence with the Minister for Pensions relating to Defined Benefit pension schemes
Parliament page
7 Feb 2024 Correspondence from TPR relating to Defined Benefit pension schemes with Liability Driven Investments
Parliament page
31 Jan 2024 Correspondence with Economic Secretary to the Treasury relating to Defined benefit pensions
Parliament page
24 Jan 2024 Correspondence with the Economic Secretary to the Treasury relating to Defined benefit pension schemes - evidence session follow-up
Parliament page
10 Jan 2024 Correspondence with the Minister for Pensions relating to meeting with the Pensions Action Group
Parliament page
10 Jan 2024 Correspondence with the Office for National Statistics relating to Defined benefit pension schemes
Parliament page
10 Jan 2024 Correspondence with the Minister for Pensions relating to Proposed Scheme Funding Regime — Open Defined benefit pension schemes
Parliament page
13 Dec 2023 Correspondence with the Pension Protection Fund relating to Defined benefit pension schemes
Parliament page
29 Nov 2023 Correspondence with Pension Protection Fund relating to Defined benefit pension schemes
Parliament page
8 Nov 2023 Correspondence from Clara-Pensions relating to defined benefit pension schemes
Parliament page
8 Nov 2023 Correspondence with the Pension Protection Fund relating to Pension Protection Fund compensation levels
Parliament page
25 Oct 2023 Correspondence with the Pension Protection Fund relating to defined benefit pension scheme inquiry and updated data
Parliament page
18 Oct 2023 Correspondence with the Prudential Regulation Authority relating to Defined benefit pension scheme consolidation
Parliament page