PLSA calls for superfund regime before establishing public sector consolidator

The Pensions and Lifetime Savings Association (PLSA) said more time is needed to determine whether establishing a public sector consolidator is needed for the UK pensions market.

As part of the Department for Work and Pensions’ (DWP) Options for Defined Benefit (DB) Schemes consultation, which is closing today, the UK government is exploring the introduction of a public sector consolidator operated by the Pension Protection Fund (PPF).

In response to the consultation, the PLSA said it has “long supported DB schemes having a wide choice of options for consolidation”. However, it said that more time is needed to determine what, if any, market failures or gaps exist that would warrant establishing a public sector consolidator.

It said that its members would prefer to have a statutory regime in place for DB superfunds before consideration is given to setting a public sector consolidator.

PLSA members also believe that if a primary regime is provided for DB superfunds, trustees of closed DB schemes would be more likely to opt for this consolidation option.

The association also said that more thought should be put into encouraging consolidation through DB master trusts.

However, if the government does decide to establish a public sector consolidator, the PLSA said a number of criteria should be met.

This includes limiting the eligibility to smaller schemes, for example with fewer than 1,000 members to avoid concerns about ‘scope creep’ and overexpansion by the public consolidator and to minimise the potential disruption to the rest of the market.

The consolidator should also be underwritten by the government and operate separately from the PPF, the PLSA stated.

Lastly, the association said the consolidator would need to be “simple, fair and easy” for employers and members to understand and enter.

Nigel Peaple, director of policy and advocacy at the PLSA, said the association would prefer the government to press on with championing private sector solutions such as DB superfunds and DB master trusts.

“If the government decides to create a public sector consolidator, we think it should be limited to smaller schemes that may be commercially unattractive, be entirely separate from the PPF, and be underwritten by the government,” he said.

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