Back in February the Department for Work and Pensions (DWP) issued a consultation considering the security and sustainability of defined benefit pension schemes.
The purpose was to consider the powers of The Pensions Regulator and encourage a debate about striking the right balance between the needs and aspirations of sponsoring employers, members, the Pension Protection Fund, and the wider economy to ensure that no one group is unfairly disadvantaged.
We found it difficult to respond to the detailed questions in the consultation paper since we fundamentally disagree with DWP on their assessment of the problem. Most of the consultation questions are conditional on the DWP assessment that problems are minor and that limited adjustments to the current regulation and supervision are sufficient.
In contrast, we think that there is massive systemic risk. Since most DB schemes are closed, they are sensitive to tail risks in the financial markets, which also will affect their sponsors in a negative way.
to read our recommendations to the DWP and proposals for areas of reform.