DB Taskforce third report - Opportunities for Change

The second report of the DB Taskforce examined four models of consolidation, from simple consolidation of administration functions through to pooling of assets, combining governance and finally the pooling of liabilities with the removal of the employer.

The third report of the Taskforce, Opportunities for Change, considered a range of options to help pension schemes facing the challenges of underfunding, weak employer covenants and lack of scale. The Taskforce’s report made three main recommendations:

• A new Chair‘s statement for DB scheme trustees. To encourage schemes to meet the highest standards, they would be required to produce an annual Statement to demonstrate to the Regulator and their members that they are operating in line with best practice in areas such as governance, investment performance and cost transparency. 
• Making it easier to standardise and simplify benefits. The UK’s DB schemes manage tens of thousands of different benefit structures: costly to administer, confusing to members and a barrier to improving efficiency. We believe whether consolidating or not, schemes would benefit from Government action to make it easier to simplify these structures while retaining actuarially equivalent benefits for each member. 
• Exchanging covenants for funding. The report proposed new measures to help schemes backed by employers with weaker covenants to benefit from turning the potentially uncertain promise of future support into tangible funding. In exchange employers would be released from their obligations and schemes transferred into new pension scheme consolidators, called Superfunds.

More on the DB Taskforce here.