Options for DB schemes DWP consultation: PLSA response

On 23 February 2024, DWP launched a consultation on options for DB schemes, which outlines plans to help make DB surplus extraction easier, alongside plans for establishing a public sector consolidator (PSC) operated by the Pension Protection Fund (PPF).

As part of this consultation, the Government is looking to:

• Introduce a statutory override to remove barriers to surplus extraction, to ensure that all DB schemes can choose to share surplus subject to the appropriate funding levels. DB pension schemes are currently enjoying high levels of funding, with many schemes running a surplus. In this context, we believe it appropriate for the Government to consider whether there is potential for trustees to share surplus with scheme members and sponsoring employers, and the most suitable mechanism for achieving this.
• Establish a public sector consolidator administered by the PPF by 2026 aimed at DB schemes unattractive to commercial providers (under a standardised benefit structure). The PLSA supports trustees having as many options as possible (run on, buy-in/buy-out, superfunds, DB Master Trusts etc). While we do not think the proposed timing is appropriate, the idea that a PSC can create an additional option for schemes and employers has merit and is worth exploring. If introduced, the eligibility settings will be particularly important, in order to avoid creating market distortions.

It will be important for the Government ensure that, if these measures are introduced, they are done so in a careful and considered manner, and align fully with the need to protect members’ benefits. To assist with this, we have provided responses to the specific consultation questions.