The Pensions Green Paper - Restoring Confidence In DB Pensions

Author:Ms Elizabeth Gane
Profession:Gowling WLG

On 20 February 2017, the Department for Work & Pensions (DWP) released its Green Paper entitled "Security and Sustainability in Defined Benefit Pension Schemes".

The Green Paper explores the current issues facing Defined Benefit (DB) pension schemes and seeks views from members, trustees, employers and other pension professionals on the ways in which confidence might be restored in a system which, although it has worked well for decades, has suffered in recent times due (at least in part) to the negative impact of some high profile cases. In this article, we look at those aspects of the Green Paper which will be of most concern to trustees. A further article considering the proposals from an employer perspective can be found here.

Key points

The evidence does not point to there being a crisis in the DB pensions sector. The system is working broadly as intended but there are widespread perceptions that the DB pensions sector is in crisis. This is not supported by the evidence. Confidence needs to be restored. Rather than there being a crisis in the DB pensions sector itself, it is more a crisis of confidence in the sector. Support, engagement and empowerment. The Green Paper explores the ways in which this could be achieved, whether by better supporting trustees, improved engagement with members or increased regulatory and trustee powers. Better supporting trustees

The Green Paper acknowledges that trustees are really the 'first line of defence' for scheme members and have a fiduciary duty to act in the best interests of all scheme members.

Although the DWP is seeking views and evidence on whether some trustee boards are acting in the most appropriate way when it comes to funding and investment decisions (it questions, for example, whether trustee boards are adopting overly conservative investment strategies, and if they are, whether this is because there is a lack of understanding or because of other factors), it does not go so far as to suggest that trustee boards should only be made up of professional trustees nor that existing trustees need more training (while acknowledging that this is being looked at by the Pensions Regulator in its work on 21st Century Trusteeship).

This approach is to be welcomed. In this team's experience, having a well-chaired, diverse trustee board is the optimal situation. Trustees receive professional advice in relation to their funding and investment strategies and there may well be good reason why trustee boards have...

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