According to research by the Pensions Management Institute (PMI), one third of pension professionals believe in employers having more power to renegotiate defined benefit (DB) schemes.   During their research the PMI surveyed 235 UK pension consultants, in addition to trustees, administrators, actuarial, legal and investment consultants.

At the PMI’s annual conference the president, Kevin LeGrand, stated that those sponsors wishing to see more flexibility were concerned for the security of members.  He said, "This is a big issue that has been debated a lot over the past year or so, particularly in regard to the impact on deficit reduction.  Not surprisingly, there was a strong majority for not allowing employers to renegotiate DB pensions and accrued benefits. The implications here are to ensure that members' benefits are properly protected."

There is a reluctance to permit DB pensions reviews and this could be explained by the fear - expressed by 94%  surveyed - that unscrupulous employers could set up a state of affairs that would enable them to renegotiate accrued DB benefits and reshape or reduce them.

When asked whether the Government should consider a statutory override to allow schemes to move to a different index - provided that they are still protected against inflation - 55% of pension professionals stated that the Government should be allowed to reassess both the preserved benefits and the indexation of benefits in payment.  However, 31% stated that it should not be allowed.

Views were equally divided in response to the question of whether schemes should be allowed to suspend indexation in some circumstances, with 57% of pension professionals against.  Of the 43% in favour to suspend indexation, 34% would permit it to keep a stressed scheme out of the PPF and 21% would allow it when funding levels fall below a prearranged threshold.

Kevin LeGrand declared,“Defined benefit pensions are often seen as sacrosanct, therefore renegotiating accrued benefits or reducing them is a very controversial issue. They are all too aware of how introducing a degree of flexibility could open Pandora’s box, leading to various unintended consequences or risks, most notably abuse.  However, our survey shows that pension professionals are willing to be pragmatic in extreme situations in order to protect benefits and secure the best outcome possible for members.”