The UK government has said that it is "not persuaded" of an affordability problem for the majority of UK employers operating a defined benefit scheme.
In its green paper published today, Security and Sustainability in Defined Benefit Pension Schemes, the Department for Work and Pensions addressed employer contributions and affordability of DB schemes and noted that it recognises that some firms are paying "very substantial deficit repair contributions", which may not be sustainable in the long term.
However, it stated that it does not have plans to take national action to transfer greater risk to members, or reduce members benefits in order to lessen financial pressure on employers.
Options that have been suggested to the DWP regarding the issue, include allowing a struggling business to more easily separate from their pension scheme, renegotiating benefits, providing greater support from The Pensions Regulator and extending the powers of the regulator so that it could separate the scheme from the employer or wind up the scheme in specific circumstances.
Nonetheless, the government suggested that all of these options do have their drawbacks and so a concrete decision is yet to be made. As a result, the government concluded that it is looking to receive as much feedback on these options as possible.
Furthermore, when it comes to DB scheme investments, the paper noted that some people believe that current valuation and funding arrangements influence schemes into short term investment decisions.
While the UK DB funding regime is not aimed to eradicate all risk, the government has suggested that more could be done by both the government and those in the pensions industry to help people understand scheme valuations and deficits, "to provide a better sense of the risks to members".
The consultation is open until 14 May 2017 and can be viewed here.
Recent Stories