On the go: Conservative peer Baroness Ros Altmann has recommended that the chancellor, Rishi Sunak, announces a year-long contribution freeze for defined benefit scheme sponsors to boost business recovery.

The proposal is one of a range of measures in Altmann’s six-point plan for pensions, which she has urged the government to take up ahead of Wednesday’s budget.

She said the contribution holidays would alleviate the burden faced by many employers of financing hefty pension scheme deficits, a problem distracting them from their post-pandemic recovery and one that has only got worse thanks to interest rate falls induced by the government’s quantitative easing programme.

The grace period would allow employers to invest in their recovery, while agreeing plans with trustees that would improve covenant and funding positions in the long term.

The measure “would also save billions of pounds of public spending that would otherwise be required in tax relief on the deficit contributions”, Altmann continued. 

“Sixty per cent of DB contributions are deficit recovery payments, and over the past few years they have been running at £10bn to £15bn a year for private employers.”

The Pensions Regulator launched guidance in March 2020, at the beginning of the Covid-19 crisis, aimed at helping employers freeze their DB obligations for three months in response to the economic fallout from the pandemic.

In June, the regulator advised trustees not to “unquestioningly” agree to extensions of these contribution holidays without checking if employers’ requests were appropriate.

Some companies have been successful in these negotiations, with British Airways announcing an agreement in late February with its New Airways Pension Scheme to defer £450m of pension deficit contributions.

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