XPS has called for certainty, simplicity, and robust protections for members, in response to the Department for Work and Pensions’ (DWP) consultation on options for Defined Benefit schemes.
Addressing the first aspect of the consultation concerning the treatment of surplus, XPS has voiced support for potential changes to surplus rules that could yield favourable outcomes for both members and employers. However, the firm has underscored the imperative for swift and effective action from the government to implement these changes effectively.
Tom Froggett, senior consultant at XPS, emphasised the need for clarity in surplus rules to empower trustees and employers to navigate their strategies with confidence. He stated, “We need certainty on surplus rules so that trustees and employers can move forward with confidence in their strategy.”
Froggett proposed a straightforward solution involving a statutory override allowing surplus payments to employers, contingent upon agreement between employers and trustees. Additionally, he advocated for the creation of a code of practice from The Pensions Regulator (TPR), outlining essential protections for trustees to consider when running schemes.
XPS’s response, informed by a recent survey encompassing trustees and employers overseeing DB schemes with an estimated £420 billion of assets, highlighted substantial support for ongoing scheme management provided robust safeguards are in place.
Turning to the second part of the consultation concerning the introduction of a public sector consolidator, XPS expressed reservations about the current government proposals. Froggett suggested an alternative role for the Pension Protection Fund (PPF) to expand its existing mandate, particularly in overseeing schemes unable to secure full member benefits upon employer insolvency.
“While the PPF has been instrumental in safeguarding pensions for nearly 300,000 members of schemes with insolvent employers, we believe it could extend its role further,” remarked Froggett.
However, XPS voiced concerns about the formation of a public sector consolidator for schemes with solvent employers, citing potential taxpayer exposure to pension risks and the need for evidence justifying such a measure. Froggett cautioned against distorting a well-functioning commercial market, particularly if deficit-ridden schemes are permitted to enter the consolidator.
XPS said its response underscores its commitment to advocating for member-centric solutions within the evolving landscape of pension scheme regulation and governance.
