Defined benefit pension schemes have been left rather upset by an unexpected bill, but could be rescued by a different Bill, as Pensions Expert editor Nick Reeve explores.
Nobody likes an unexpected bill. Many of us will have faced higher energy bills in recent years, opening emails and envelopes with increasing trepidation.
It must be particularly galling to receive an unexpected bill when you’ve spent months working to reduce the cost of a service, only for the provider to charge for something you’d forgotten about.
That’s the reality facing many private sector defined benefit (DB) pension schemes. Just as the industry was welcoming the news that policymakers will work to allow the Pension Protection Fund to reduce its risk-based levy to zero, brown envelopes started arriving at DB schemes.
As Pensions Expert reported yesterday, these unexpected bills related to the PPF administration levy, a separate charge overseen by the Department for Work and Pensions that had been suspended for two years. It’s previously been criticised in a formal government-commissioned review and recommended for abolition.
Help may come through another, much more expected, bill – the Pension Schemes Bill. With the paint on this week’s rebrand barely dry, Pensions UK (the trade body formerly known as the PLSA) is now lobbying ministers for an amendment to the bill to abolish the administration levy.
The first parliamentary debate on the Pension Schemes Bill is scheduled for Monday, giving little time to fully brief MPs. Assuming the bill passes this stage, it will then be scrutinised by a committee over the next few weeks – likely the first real chance for the industry to push for changes.
Speaking of bills, with pension adequacy very much a focus for the industry, there is a key question to answer about who will pay for better pension outcomes. The Federation of Small Businesses has warned that higher employer contributions could have serious negative consequences for firms, especially following recent increases in national insurance bills.
The Institute for Fiscal Studies this week published the results of a two-and-a-half-year research project into adequacy and how to improve outcomes without further straining the public purse. Its suggestions include a change to the guarantees attached to the state pension and amendments to auto-enrolment designed to support low earners in particular.
We all support better retirement outcomes, but the money has to come from somewhere. Perhaps we need to start looking down the back of the sofa for any stray ‘bills’.
I’m off to listen to some Bill Withers.
Nick Reeve is editor of Pensions Expert.
This editorial initially appeared in Pensions Expert’s Friday Takeaway email, summarising the biggest news of the week and the latest appointments. To sign up, please register for free.
