Pension Schemes May Be Allowed To Break ‘Inflation Promises’
Defined-benefit scheme companies are the ones suffering today as their pension deficits continue to rise making it difficult to fulfil their obligations to employees.
A UK parliamentary committee is currently considering proposals that would allow private sector pension schemes to reduce their pensions deficits by suspending inflation-linked increases for pensioners.
This would mean the benefit values of the pensions during the time the DBP scheme was approved would have the original values used instead of today’s inflated values.
Pensioners can get a higher amount from their pensions if the prospective idea is used instead of companies forwarding their issues to the Pension Protection Fund.
According to Committee Chairman Frank Field, ‘survival’ is the biggest issue.
“We should make clear our aim, with any policy changes, is the primary goal of safeguarding, in the best possible form, DB pension schemes,” Mr Field said ahead of the launch of the inquiry into defined benefit schemes.
“The aim is survival now, which gives you flexibility in the longer run,” he said.
The veteran Labour MP said that while it might be difficult for trustees to negotiate flexibility, they should insist they have the right to reverse any agreement on reducing inflation rises “if and when better times come”.
“That might be the price for survival now,” said Mr Field.