Commons Sense

House of Commons · Westminster Hall

Defined-Benefit Pension Schemes

17 January 2024 · 4 other contributors · 4,509 words

Opened by Alistair Carmichael Lib Dem Orkney and Shetland

Responding minister: Paul Maynard

Benefits & Welfare

Summarised by AI from the official record, so it can contain mistakes.

Read the full transcript on Parliament.uk

At a glance

Alistair Carmichael raised concerns about defined-benefit pension schemes in Westminster Hall. A government minister responded.

Key points

  • Alistair Carmichael is concerned about conflicts of interest in defined-benefit pension schemes, particularly for BP and Shell.
  • Carmichael urges the Government to ensure that trustee boards have a majority of truly independent experts to protect beneficiaries' interests.
  • Carmichael asks for clarification on how trustees balance the interests of pension beneficiaries against those of companies or insurance providers.

Key requests to Government

Carmichael urges the Government to reinforce the requirement that trustee boards must be demonstrably independent, with a majority of members being truly independent experts rather than company employees. He also asks for clarification on how trustees balance beneficiaries' interests against those of companies or insurance providers managing pension funds.

How the debate unfolded

MPs spoke in turn to share their views and ask questions. Here's what each person said.

Opened the debate

Alistair Carmichael Lib Dem Orkney and Shetland

Alistair Carmichael is concerned about the regulation of defined-benefit pension schemes, specifically highlighting issues with BP and Shell pension funds. He points out that decisions affecting these pensions should be in the best interests of beneficiaries but fears conflicts arise when trustees must prioritize company financial interests over those of retirees. The funding ratio of the BP pension fund stands at 132%, and yet it refused to pay a discretionary increase recommended by trustees, causing significant distress among pensioners who believe their contractual promises are being broken.

Other contributors (4)
  • Angela Crawley Con Wansbeck

    Representing a constituency with Shell pensioners, Angela Crawley agrees that the issues discussed in this debate are relevant to her constituents and supports the need for more careful regulation of pension schemes.

  • Jim Shannon DUP Strangford

    He commends the debate and agrees that the Government has been warned about a UK-wide pension crisis if changes are not made soon. He asks the Department for Work and Pensions to begin taking steps today to rectify the precarious position of pension schemes.

  • Justin Madders Lab Ellesmere Port and Bromborough

    There are many Shell pensioners in his constituency, and Shell decided last year not to award an inflation-matching increase in the pension despite giving a similar rise to Dutch pensioners. This highlights the problem of different rules for managing pensions across countries. Mr Madders acknowledges the Minister's response and highlights issues related to good faith in pension schemes, referencing cases such as FOSPEN, Midland Bank clawback, and WASPI women, urging for tougher measures.

  • Wendy Chamberlain Lib Dem North East Fife

    With 60,000 BP pensioners impacted, she agrees that BP has a duty to take the advice of its appointed trustees to prevent real-terms cuts to pensions.

Government Response

Paul Maynard

It is a pleasure to serve under the chairmanship of Mr Davies. I acknowledge the interest shown in pension schemes and express appreciation for the points made regarding individual schemes, focusing instead on general terms today. Legislation sets minimum standards for DB indexation without preventing more generous arrangements through scheme rules or discretionary basis. The Government's role is to ensure compliance with statutory requirements while avoiding interference in decisions made by individual schemes. Trustees must act in the best interests of members now and in the future, balancing funding problems and long-term health of the scheme. Different models of trusteeship are appropriate depending on the characteristics of the scheme, and safeguards such as Pensions Regulator powers exist to address trustee capability or behaviour issues. A DB pension guarantees a certain amount of pension income every month for life, with additional inheritance benefits. The governance of DB schemes must balance needs across different parties including trustees, employers, and members. Legislation aims to ensure protection against inflation within regulatory frameworks. While sympathetic to pensioners who find their income not increasing as expected or planned, the minister will closely examine situations regarding the scheme discussed in debate, discuss with the Pensions Regulator, and consider proposals for improving trustee quality. Emphasis is on avoiding pushing smaller schemes into administration under the Pension Protection Fund while maintaining balance.

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