Defined-benefit Pension Schemes

Part of Backbench Business – in Westminster Hall at 4:40 pm on 10 July 2018.

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Photo of Paul Masterton Paul Masterton Conservative, East Renfrewshire 4:40, 10 July 2018

It is a pleasure to serve under your chairmanship, Mr Hollobone. I refer the House to my entry in the Register of Members’ Financial Interests. For the 10 years before I was elected, I was a pensions specialist solicitor. I must say to Laura Smith that, for someone who claims not to be an expert, she demonstrated an incredible grasp of the key issues in a good opening speech, which certainly puts me to shame.

When we talk about protecting DB schemes, it is worth remembering that the fiduciary duty on the part of trustees is to protect the benefits already built up. Their responsibility is to ensure that the benefits accrued can be paid, not to ensure that an employer continues with ongoing DB provision. That is fundamentally an employment matter. On many occasions, the best way to protect DB benefits is to reduce future accrual, to close the scheme or—in the most nuclear option—to tip the employer into insolvency and have the scheme move into the Pension Protection Fund, so we must be careful about what we mean by protecting DB benefits and DB schemes.

It goes without saying that DB schemes face major challenges, and the Government have recognised that through the Green Paper and then the White Paper. When the Green Paper came out, I was not sure whether I agreed with the statement that DB schemes were not largely unaffordable simply due to my case load in the office at that time. Generally, the system works well for most employers, but we need a tougher approach for those failing to act responsibly.

I am pleased that the regulator was granted many of the powers it sought, because one of my big frustrations in practice was that it was largely toothless. It would send a lot of letters and have conference calls. Those who were really unfortunate would be dragged down to Brighton for an awful meeting where nothing really happened.