Field hopeful for DB pay-out reform

Field hopeful for DB pay-out reform

Work and Pensions select committee chairman Frank Field said he is optimistic his inquiry into the defined benefit funding crisis will lead to meaningful changes to the sector.

Mr Field revealed he was hopeful of defined benefit reform despite the government's failure to enact a similar reform of the Tata Steel pension scheme.

Speaking to Financial Adviser, the veteran Labour MP said he hoped the inquiry, which commenced last week, would result in legislation that allowed troubled DB schemes to reduce their benefits before they fall into the Pension Protection Fund.

“What we’re anxious to achieve is that greater flexibility is introduced so company schemes can ride through this difficult period, but when the good times return they can reclaim the benefits they surrendered,” he said.

Mr Field said he believed the collapse of the BHS pension scheme would have persuaded the government of the need for "a larger pension reform".

But he stressed that any such reform would have to be in the interest of the scheme members, not just that of the sponsoring employer.

“The bottom line is, what would you be getting from the PPF? People do need to understand that, while the PPF is a lifeboat, there isn’t much luxury in it," he said.

He added that there would have to be a "trip wire" in  place to ensure that only companies that needed to reduce their benefits could do so.

Earlier this year, the government proposed enacting a similar reform applying exclusively to the British Steel Pension Scheme.

It was hoped this would enable the sale of its sponsoring employer, Tata Steel, and the survival of the Port Talbot steelworks.

However, the government apparently dropped the proposal following firm push-back from the Pension Protection Fund.

Mr Field said of the apparent failure: “It [the proposal] was launched in a more cack-handed way than it might have been. To say that any reform is not going to affect other schemes was weird, if not folly. So I’m not surprised it stalled.”

However, he said the plan's failure did not have any bearing on wider reform.

Mr Field said he had not yet gauged the position of his fellow MPs on the Work and Pensions select committee, but said: "It’s reasonable to say that people are cautious, naturally and properly.” 

He added around a third of the committee had been promoted to ministerial positions in the post-Brexit reshuffle, and would have to be replaced - making it a "different animal". 

Mr Field, who campaigned to leave the European Union, said the DB crisis had not become "less urgent post-Brexit".

The most commonly discussed change would be to allow pension schemes to link annual pension increases to the consumer price index rather than the usually-higher retail price index.