Comment | Con Keating


The decline and ruination of UK DB schemes: Politics run riot


Con Keating con2.keating@brightonrockgroup.co.uk


Con Keating is head of research at BrightonRock Group


With the TPR consultation on the proposed long-term funding targets for DB schemes coming up this summer, Con Keating warns that trustee duties are set to become more onerous.


For many decades, until the early 1990s, the his- tory of defined benefit (DB) pensions was one of converting member expectations into rights through the introduction of legislation. The clear- est example was compulsory pension indexation.


These changes also usually had the politically convenient effect of


lowering pressure on


increases for the inadequate state pension by transferring the expense to the private sector. By the early 1990s a number of scandals had raised the political profile of DB pensions, fol- lowed by populist calls for action. Some issues resulted from existing legislation, notably the pri- ority rules for asset distribution in insolvency.


16 | portfolio institutional | April 2019 | issue 83


Pensioners in payment had priority over active and deferred members, who could lose much or all of a working lifetime’s pension savings. Sir Roy Goode, an academic commercial lawyer, appropriately summarised the position of the pen- sion fund when he said: “…the employer’s statuto- ry duty on wind up of a scheme is not to ensure that pensions are able to be paid when due but to pay the cash equivalent of the accrued rights. “By full funding we mean funding at a level suffi- cient to ensure that if at any time a scheme were to be discontinued the value of the assets would be not less than the accrued liabilities,” he added. The fund may or may not have been sufficient to provide the pensions depending on market con-


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