Six in 10 (60 per cent) defined benefit (DB) pension members fear the government’s plans to allow employers to extract surplus cash from their schemes would create risks for them and other members, research from Pensions Insurance Corporation (PIC) has found.

The government previously announced plans to lift restrictions on how well-funded occupational DB pension schemes can invest their surplus funds, to unlock "billions" of pounds to drive growth and boost pension pots, with the details expected to be set out this spring.

However, PIC said that early evidence from companies gaining access to surplus money
showed they are more likely to pass the funds to their shareholders.

But research from PIC found that 56 per cent of DB members want money in their scheme to benefit them, not be given to employers.

PIC noted that the original government consultation on the surplus extraction policy said that "any extraction of surplus will reduce security for members".

The research showed that security is "extremely important" to pension scheme members, as 96 per cent said certainty about the level of their pension over future years was very important or important.

Meanwhile, 96 per cent said that having a secure pension income not affected by financial markets was very important or important.

The research also suggested that older members are “overwhelmingly” opposed to surplus extraction, with 70 per cent of over 55’s opposing surplus extraction.

In addition to this, over nine in 10 (94 per cent) DB pension members said they do not want politicians interfering with their pensions, compared to 8 per cent of pension scheme members who said they trust politicians to make decisions that affect their pension incomes.

However, the research showed that DB members have a high-level trust in scheme trustees as 90 per cent said it was important that “trustees look after my pension, meaning employers can't get access to the money in the scheme”.

PIC CEO, Tracy Blackwell, said that the firm think the views of DB members, many of them elderly, many of them classified as vulnerable, should be properly considered in any decision about a policy that the government’s own document said would reduce the security of their pensions.

But she said that so far, their voices have been “entirely absent” in this debate.

“What this polling shows for the first time is that many of the people who rely on a DB pension are afraid of changes that could make their pensions less secure,” she explained.

“It took a long time to build up a legal regime for DB pensions that puts members first, after the scandals of the 1980’s and 1990’s.

“Members are clearly concerned at the prospect of these vital protections being watered down and I would advise them to write to their MP about these proposals.”

She said PIC’s view is that it is “fundamentally right” that members’ benefits are fully secured before the sponsoring employer gets any cashback – a position that should align everyone’s interests.

Blackwell warned that ministers need to be “very careful” with this issue given that this is about the financial wellbeing of generally older, and potentially vulnerable, people.

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