The Cass Pensions Institute says new solutions are needed in stressed defined benefit pension schemes to prevent intergenerational inequities.

The Institute has responded to the Department of Work and Pensions Green Paper, Security and Sustainability in Defined Benefit Pension Schemes.

The Greatest Good 2 paper follows up and reconfirms the findings of an 2015 Pensions Institute discussion paper which found that 1,000 occupational defined benefit (DB) pension schemes are stressed as a result of having financially weak sponsors.

Professor David Blake, Director, Pensions Institute said the slide of many of these schemes into the Pensions Protection Fund (PPF) seems inevitable because policy and regulation demand that schemes adhere to the binary outcomes of paying full benefits or going into insolvency.

“We call for the government to pursue a policy of ‘second best’ outcomes allowing schemes with weak sponsors for whom insolvency is inevitable to negotiate settlements between full benefits and the benefits provided through the PPF,” he said.
To prepare their response, the researchers interviewed experts who identified as the most pressing issues for DB occupational pensions; affordability, information provided to trustees and members, empowering the regulator, sector consolidation, and technical provisions.

Based on their findings, the paper proposes a series of measures that would help deliver second-best outcomes which the researchers say would be cost-effective.

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