DB pensions would benefit from less regulation

Increasing pressure and regulation on UK employers could reduce the lifespan of remaining defined benefit (DB) pension schemes.

Factors such as excessive regulation, increased longevity and capital market instability have all placed additional pressure on employers that currently offer a DB pension.

Richard Lambert, director general at the Confederation of British Industry (CBI), said: “Pension deficits are back near the top of the corporate worry list. There is an incoming tide of complex and expensive regulation that threatens to drive an extra nail into the coffin of many DB schemes. The result is growing pressure on the boardroom to be wary of involvement in DB [schemes – and even avoid them altogether where possible. A change of direction is needed if these schemes are to be preserved.”

Speaking at an event hosted by Watson Wyatt, he added that the burden had been increased by proposed changes put forward by the Accounting Standards Board and the Pensions Regulator, as well as rises in the pension protection fund levy.

Lambert proposed three measures that could help to reform the UK’s regulatory system in order to preserve DB pensions provision. Firstly, the government should take a tougher risk-based approach to future pensions legislation. This should be accompanied by giving employers more stability, for example, around costs, and providing organisations with more freedom to design schemes that suit their needs provided they work in practice and are understood by members, he said

“It would be a matter of regret, socially and economically, for the remaining DB schemes to be squeezed out by ill-judged [regulation],” concluded Lambert.