UK - The Pension Protection Fundís guarantees are worthless unless the government underwrites them, the Lords heard.
Opposition parties said workers would believe the PPF “guaranteed” 100% of benefits to pensioners and 90% to active and deferred members.
But provisions in the Pensions Bill allowed the work and pensions secretary or the Pensions Compensation Board to reduce payouts in “extraordinary” circumstances, such as the simultaneous collapse of several FTSE100 firms.
Tory work and pensions spokesman Lord Higgins said: “I would have thought that the whole point of this Bill is that people who have suffered because their pension schemes have collapsed should have a degree of certainty about what is happening.
“Giving the board the power to recommend a reduction to the secretary of state, and for him to agree it, seems to undermine the whole point.”
Lord Oakeshott, the Liberal Democrats’ pensions spokesman, called on the government to underwrite the PPF instead of stripping benefits from pensioners.
But pensions minister Baroness Hollis said a cut in benefits would only take place if other avenues - including increasing employer levies, reducing revaluation and reducing indexation - had failed.
She said: “It would have to be apocalyptic for that situation to occur. Although we do not expect this power to be used, we consider it essential to ensure the long-term viability of the PPF.”
The Pensions and Lifetime Savings Association (PLSA) has announced it will shrink its board by more than one-third as part of a governance overhaul to make it "agile and more appropriate".
Smaller FTSE 350 defined benefit (DB) schemes were nearly 15 percentage points less well-funded than larger schemes in 2017, according to a Goldman Sachs Asset Management (GSAM) analysis.
The advent of collective pension systems could help the UK avoid demographic challenges which will make it "impossible" for society to help savers in retirement, experts say.