In the fourth of a five-part series of articles for PP, pensions minister Guy Opperman sets out how revised funding arrangements for defined benefit schemes will better protect members.
Making pensions safer by properly protecting members' benefits is a core part of the Pension Schemes Bill.
There too many examples where individuals' hard earned pension savings have been put at risk. And that's why the scheme funding measures focus on planning for the long term, and on clearer funding standards.
The government does not want good pension schemes to close unnecessarily. But the members in these schemes need appropriate protection. If employers want to offer defined benefit pensions as part of their recruitment and retention strategy, they must be able to pay the true cost of providing those benefits.
That is why we are building on our successful scheme-specific regime. The right thing to do is to take account of the actual circumstances of individual schemes when deciding what investment risk is supportable.
That doesn't mean that we want all open schemes to de-risk like closed schemes. We want a truly bespoke approach, considerate of individual schemes and their characteristics. We will use the regulation-making powers to ensure that the secondary legislation does not prevent appropriate open schemes from investing in riskier investments where there are potentially higher returns as long as the risks being taken can be supported, and members' benefits and the Pension Protection Fund are effectively protected.
The detail of these arrangements will be set out in secondary legislation which will be subject to consultation and we look forward to engaging with interested parties in the consultation. We would encourage everyone to engage with The Pensions Regulator's consultation on the revised defined benefit funding code of practice, as we seek to refine the details of the regime. Full impact assessments will be produced both for the secondary legislation and the revised funding code.
Guy Opperman is pensions and financial inclusion minister
Other articles in this series
In a five-part series of articles for PP, pensions minister Guy Opperman talks about various aspects of the Pension Schemes Bill, which is expected to be passed into law shortly