Better protections for pension savers in defined benefit schemes are being considered as part of a government consultation. ⬇️
DB schemes have become increasingly challenging to run in the past decade, partly because of the steep drop in bond yields.
If a DB scheme cannot cover what it owes its members, then firms often have to find ways to fill this gap, often by having to contribute to it themselves, which weighs on their profits. When British Airways closed both its defined benefit and defined contribution schemes to new contributions in 2018, and replaced them with a flexible benefits scheme, it said it expected to save £80m a year.
The PPF, now one of the UK’s largest pension funds, is partially funded through a compulsory levy on DB schemes, which helps it fund its outgoings, as well as investments and through the sale of assets it recovers from insolvent firms. There were 1,398 schemes in deficit, but the deficit of these schemes had fallen to £25.3bn in June from £28.2bn at the end of May.A DB scheme is always set up by an employer, with the amount paid out as a pension dependent on how long an individual has worked with the company and how much they earned.
Under a previous system , some people with workplace, personal or stakeholder pensions may have paid reduced national insurance contributions, and for such individuals, their state pension may be less than the full amount.
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