Guest speaker at the Association of Consulting Actuaries’ (ACA) Annual Dinner was the Pensions Minister, Steve Webb MP. ACA Chairman Andrew Vaughan called for a positive response to the Defined Ambition pension ideas that are presently open for consultation. The reforms look to cap employers’ pension costs whilst also meeting employees’ legitimate calls for greater certainty over the pensions that are delivered. A recently published ACA survey of employers found six out of ten would consider these kinds of pension options if they were permitted in UK legislation.
Andrew Vaughan said:
“The Defined Ambition consultation paper is open for comments until 19 December and it is to be hoped those that respond will do so on a ‘can do’ basis, looking to extend the pension options for employers and their staff, rather than complain ‘it’s all too late’.
“Over the next year or so, employers sponsoring defined benefit schemes that remain open to accrual will have to review those schemes to encompass the end of DB contracting-out. These schemes look after the future accrual of pensions for over 1.9 million active members. Those employers need to see the flexible DB ideas in the Defined Ambition paper moving towards the statute book at pace, otherwise I fear it will just be a matter of time before the number of open earnings-related schemes is close to zero.
“Yes, it would have been better if the flexible DB ideas had been implemented a decade ago and the Collective DC ideas given a better hearing five years ago but you can’t wind back time unless of course you have a time machine!
“So where will we go in the next 50 years in pension terms – will the DB wheels finally fall off or is there a chance of some form of flexible DB. In my view, to a large extent, this depends on the success of the reforms proposed in the Defined Ambition paper. I would like to personally congratulate Steve Webb on doing a tremendous job on pension reform during his term of office.
“From an industry perspective and in particular from the consumer perspective, he has introduced substantial reforms that will benefit future generations of pensioners. The final piece of the jigsaw is the reform of
workplace pensions and this is where Defined Ambition has such an important part to play.
“So we are at a crossroads and this is where it is vital that we get the support of the industry for the Defined Ambition reforms. Even if you don’t agree with all of the reforms, this is a call for a positive endorsement from the pensions and wider business community to justify making changes to the legislation. So please do put your positive and creative hats on when responding to what in my view is a watershed consultation.”
“The DWP has just opened a blog on Defined Ambition so it is easy to post comments about the consultation document.
Turning to other topical areas, Andrew Vaughan added:
“Yes, we understand and support the drive towards greater transparency on pension charges and a more robust governance regime for DC pensions, particularly with so many more employers about to take their first-steps into sponsoring some form of pension under auto-enrolment.
“We must however take care not to over-burden employers or over-expect employees to become fully engaged with DC pensions. I sense concern is growing amongst smaller employers and advisers that the scale of changes and the time-scales envisaged are very challenging at a time when still around 1 million employers have to grapple with making pension provision available in any form for the first time.”
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