One In Six Occupational Pension Schemes Could Fail

The rather stark message from the Pensions Institute Discussion Paper The Greatest Good for the Greatest Number published in December 2015 is that up to 1,000 private sector defined benefit ("DB") occupational pension schemes are "stressed" and unlikely to pay members pensions in full.

The paper sets out proposals for further discussion and legislative and regulatory change to address the challenges that this presents.

The paper defines a DB scheme as "stressed" where it is significantly underfunded relative to the value of the employer's business, with a weak employer covenant. Of the 1,000 DB schemes that the paper concludes are stressed (being around 17% of all private sector DB schemes) it estimates that 400 DB schemes have sponsoring employers with viable businesses, but will not survive if the pension deficit remains on the corporate balance sheet. The remaining 600 will never ever pay full benefits and the question becomes one of when, not if, the DB scheme