Industry experts have welcomed the Work and Pensions Committee’s (WPC) call for evidence on defined benefit (DB) pension schemes, with a number of organisations arguing that changes to the current regime are needed.

The WPC initially announced plans for the inquiry into the DB landscape in March 2023, stating that the recent improvement in aggregate scheme funding makes this "an important time to consider the future".

XPS Pensions Group co-chief executive officer, Paul Cuff, also described the inquiry as “timely” given the fact that many schemes are now very well-funded, suggesting that the £1.5trn of UK DB pension assets could be used as a “force for good to tackle some of the leading issues the UK is facing”.

However, Cuff emphasised the need for some changes to the current regime to help ease cost pressures on employers, encourage people to stay in the workforce longer, encourage investment in the UK economy, and boost DC savings for the next generation.

Hymans Robertson senior actuary, Patrick Bloomfield, echoed this, stating that the firm was “heartened” that the committee is asking these questions about a potential renaissance in UK DB market now, before the new DB funding regulations are finalised.

“A DB renaissance is possible and the societal benefits could be enormous,” he continued, agreeing however that rekindling DB would require large-scale policy incentives to counterweight the inherent risks.

“The outcomes of this call for a potential UK DB renaissance mustn’t just be left to resurface in future but looked at seriously now, because the current generation of workers can’t afford to retire as a result having inadequate DC savings," he said.

"Stronger tax incentives for saving via DB (compared to DC or CDC) could help to restore DB accrual as a mainstream benefit in the UK private sector.”

Pensions and Lifetime Savings Association (PLSA) director of policy and advocacy, Nigel Peaple, also stressed that DB schemes remain of critical importance in the provision of pensions, arguing that it is “vital” that the strong regulatory system in place remains fit for purpose.

“With many more DB funds expected to be in surplus over the coming years, the market for buy-in and buyout may reach capacity, so it important that the system can accommodate alternative end games for schemes,” he continued.

“The PLSA would like to see the government proceed with finalising the superfunds legislation to help with this.

“Consideration should also be given to reforming the current fraud compensation regime and having a discussion about how excess funds held by the PPF should be treated at the appropriate time.”

Specific changes may also be needed to ensure that open pension schemes remain supported, as the Association of Consulting Actuaries (ACA) said that, without radical change, it was sceptical that the DB regulatory framework will allow open schemes to ‘thrive’.

“ACA believes new scheme funding regulations need to be put in place very carefully to make sure current open schemes continue to thrive," ACA chair, Steven Taylor, stated.

"Given sponsors’ historical experiences with DB schemes, closed schemes are unlikely to be reopened. Instead, we believe CDC schemes will be better placed to thrive in coming years provided regulations emerge as currently planned."

Similar concerns were raised by the Association of Professional Pension Trustees (APPT), with chair, Harus Rai, emphasising the need for the new DB Funding Code to support long- term investment for open schemes.

Rai stated: ‘The UK pensions market since Maxwell is heavily regulated sectors, making it difficult for open DB schemes to continue as both the cost and risk faced by the sponsor is significant particularly when set against other forms of pension provision.

"The DB funding and governance regulatory regime is now primarily focused on mitigating the range of financial, governance and operational risks within the DB pensions system, rather than its growth or encouraging it to thrive.

"This is understandable, given the risks involved in the delivery of members’ pension promises. However, our view is that there are opportunities for reform of the regime to encourage growth within the DB system, while also mitigating these considerable risks.

"In order to further any objective of enabling open DB schemes to thrive any funding code (including specifically the proposed new one) needs to support long- term investment for open schemes.

"There is no inherent risk which cannot be managed appropriately, but requiring open schemes to de-risk on the same basis as closed schemes may not always be in the best interests of members, could limit the options of the sponsor with regard to pension provisions and create a “one-size fits all environment”.

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