The chair of an influential group of MPs today supported calls to allow financially distressed firms to jettison huge retirement deficits in order to avert further BHS-style collapses.
The Pensions and Lifetime Savings Association (PLSA) said companies should be given the option to transfer pension schemes into “superfunds”, paying an upfront cash lump sum and freeing them from shouldering future payouts to retirees.
Frank Field, who chairs the Work and Pensions select committee, said: "We have called on the government and industry to look at ways of consolidating smaller or weaker funds for the benefit of pensioners.
We are grateful for the work PLSA has done on this and hope that the government will take this... forward in the expected pensions white paper.
The PLSA estimated around 3m Britons with “gold-plated” final salary schemes have only a 50:50 chance of receiving full payouts in the fullness of time. Transferring pension schemes to superfunds would provide a more than 90 per cent chance of members receiving payments in full, it said.
Chair of the PLSA defined benefit taskforce Ashok Gupta said: "There is a real possibility that without change we will see more high-profile company failures such as BHS or Tata Steel."
Experts responded to the proposals calling them “innovative” but warned that if the offloading of responsibilities was not correctly policed, pensioners could be adversely affected.
But a spokesperson for the Pensions Regulator highlighted only "some" of the Britain’s final salary schemes “are facing significant challenges”.
“Over the longer term, most [firms] will be able to pay members their promised benefits,” added the spokesperson for Britain’s pension watchdog.
Lincoln Pensions chief executive Darren Redmayne said the PLSA proposals should require a sign-off in the form of a “fairness opinion” from experts “to say that they believe selling for a particular amount of money is in the interests of the members”.
Hugh Nolan, president of the Society of Pension Professionals, said: “Many defined benefit schemes do face funding pressures because of the current economic climate, the credit crunch, legislative enhancements to benefits and increased longevity.
“The UK pension system has proved robust enough so that only a small minority of members are exposed to a potential failure of their scheme, with the Pension Protection Fund lifeboat to protect those who need it too.”