The Pension Schemes Bill could see regulator having to actively promote defined benefit schemes where possible, if an amendment gets passed.
Peers from the House of Lords tabled a number of amendments to the Pension Schemes Bill this week (February 11), which included clauses to promote the use of DB schemes and review tax rules.
An amendment was put forward by Lord McKenzie to change the Pensions Act 2004 to require TPR to promote the membership of DB schemes under the section “regulator’s objectives”.
Another amendment put forward by Lord McKenzie would force the government to conduct a review of the effects of the tapered annual allowance.
The DB amendment requires the government to lay before both the House of Lords and House of Commons a strategy for protecting public sector DB schemes within six months of the Pension Schemes Bill becoming an Act.
But Tom Selby, senior analyst at AJ Bell, said public sector DB schemes did not need protecting.
Mr Selby said: “I’m not exactly sure what kind of extra ‘protection’ public sector schemes might need given they are among the most generous available and guaranteed by the taxpayer.
“If anything it is taxpayers who need protecting from the rising cost of supporting unfunded pension promises to public sector workers."
He added: “In terms of promoting DB membership, members need to understand the value of their guaranteed pensions and the implications if they choose to give them up – which is why the advice requirement on DB transfers exists.
“However, it remains the case that DC also offers benefits – in particular flexibility and potentially advantageous death benefits – which members should be aware of as well.
“More broadly, DB isn’t available to most workers anymore. We really need to shift the focus to promoting the value in DC pensions and encouraging people to save more, which is how the vast majority will build their retirement fund now.”
Ian Browne, pensions expert at Quilter, said while more needed to be done to encourage long-term saving the focus should be on restoring the reputation of pensions.
Mr Browne said: “The role of industry regulators is primarily to ensure the safety and soundness of pension schemes and to punish those who cause harm. However, there may be more that regulators could do to support and enhance the public reputation of pensions, in addition to their existing oversight and regulation responsibilities.
“The proposed amendment to the bill could create a welcome new source of promotion for the merit of pension savings, with the industry regulator asked to promote scheme membership and its benefits.”
But he warned the promotion should be across all pension products rather than focusing on DB schemes.
He added: “We would caution that the amendment only refers to promoting DB schemes - presumably in the interests of ensuring those savers with gold-plated pensions fully appreciate the value of the benefits to which they are entitled - but that promoting pension should span all kinds of retirement saving, including DC pensions which are the bedrock of the government’s flagship auto-enrolment policy to get more people saving for retirement in DC schemes.”