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Overview (partial) "There is an underlying assumption on the part of UK policymakers that the legal and regulatory framework governing the relationship between a defined benefit (DB) scheme’s sponsoring employer, the scheme members and the Pension Protection Fund (PPF) will lead to an optimal outcome, namely that most employers’ businesses will survive long enough to pay members their full benefits … The research for this discussion paper suggests that this optimistic picture does not reflect the reality that many trustees face, as they strive to manage the seemingly impossible conflicts of interests between the diverse stakeholders to the scheme. A more realistic perspective, as presented in this discussion paper, draws attention to the all too common scenario where the pension scheme is significantly underfunded relative to the value of the sponsor’s business, and the trustees cannot rely on the financial support they need from the sponsor because its covenant is weak. In this discussion paper, we describe these schemes as ‘stressed’ … The discussion paper found that for political and economic reasons, the crushing reality of the situation in which trustees of stressed schemes find themselves is not publicly acknowledged and debated. This collective ‘silence’ serves to stifle the development of practical damage-limitation strategies – what we might call ‘second-best’ outcomes – where the trustees satisfy as best they can their obligations to all stakeholders to the scheme."

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