Consolidator in waiting? Government taking its time to assess extension of PPF remit

The long-awaited consultation response, which was published last Thursday, outlines the Department for Work and Pensions’ (DWP) conclusions from its Options for Defined Benefit Schemes consultation.

It suggests that a “small, focused government consolidator administered by the PPF” could provide a vital alternative for schemes unable to access commercial solutions, particularly underfunded or hard-to-place smaller schemes.

However, despite the possible benefits, the government has put the brakes on its plans.

“We will not be legislating for the consolidator in the forthcoming Pension Schemes Bill,” the DWP confirmed, stating it would instead “continue to consider how a consolidator could be additive to complement rather than compete with existing options in the DB market”.

Respondents to the government’s consultation had raised several concerns about the proposed consolidator model. These included the risk of market distortion if the PPF is seen to have a competitive advantage, uncertainty around funding and entry criteria, and the need for clarity on how the employer covenant would operate, particularly for underfunded schemes.

Several respondents also warned that the consolidator must not undermine the developing superfund market or disrupt access to the bulk annuity market.

‘Rationale for government consolidator remains unclear’

Some commentators were optimistic about how the plans for a government-backed consolidator would evolve. Sachin Patel, head of corporate DB at Hymans Robertson said: “We’re supportive of the introduction of a public-sector consolidator in principle if it fills a gap in the commercial endgame market and improves member outcomes where full benefits would otherwise be at risk.”

However, other industry responses have been cautious, asking whether there is any need for such a development.

Jon Forsyth, chair of the Society of Pension Professionals’ DB committee, said: “The precise rationale for such a consolidator remains unclear and significant care is needed not to disrupt the well-functioning insurance market or stifle the development of the superfund market.”

For others, the measured pace is seen as pragmatic. David Hamilton, chief actuary at Broadstone, said: “It is sensible to make sure that the design of such a vehicle is carefully thought through and delivers genuine benefits, and the original timescales were simply too optimistic.”

“We will support the government as it considers this further, and engage industry stakeholders, so any future solution suitably complements existing commercial providers and delivers good member outcomes.”

PPF spokesperson

In its consultation response, the government noted improvements in funding levels across the DB landscape and increased innovation in the buyout market, particularly for schemes below £100m, as reasons to wait and monitor how supply and demand evolve.

This was echoed by Hymans Robertson’s Patel, who noted that small schemes were already benefitting from streamlined access to the bulk annuity market through dedicated services offered by consultants and insurers.

Unsurprisingly, the PPF was positive about the move. A spokesperson for the lifeboat fund said last week that it would “support the government as it considers this further, and engage industry stakeholders, so any future solution suitably complements existing commercial providers and delivers good member outcomes”.

Commercial consolidators and insurers remain wary of a government-backed entity that could undercut pricing or distort the competitive landscape. Meanwhile, advocates of reform are frustrated that a solution for schemes struggling to access endgame options has once again been delayed.

For now, the PPF remains a consolidator in waiting, with the broad model outlined but no legislative vehicle or firm timeline in place. While the door remains open, the path to delivery is far from clear.

Sara Benwell is a freelance journalist.