Kevin Le Grand, Head of Pensions Policy at Buck Consultants, comments on the Department for Work & Pensions’ latest paper on Defined Ambition:
We welcome the publication of this comprehensive consideration of the full breadth of potential pension scheme designs. Workplace pensions are in a poor place currently and the country desperately needs some innovation here.
There are three main problems to overcome, in solving the crisis:
1. Getting employers to set up a scheme that meets their business needs and the retirement needs of their employees
2. Getting employees to join and contribute to it
3. Ensuring that members get a good outcome from it
Points one and three are heavily reliant upon design issues; these are now being considered through comprehensive interaction between the government and the pensions industry. The second point is being addressed over time by automatic enrolment, but contribution rates will have to increase above the modest minimum required by statute.
We welcome the government’s inclusive “grown-up” approach to considering the whole pensions designs landscape, which is more likely to achieve a lasting result than one where the government tells the industry what it can and cannot do. The government’s role here is to create the environment in which industry expertise has the freedom to develop innovative solutions that work in the real world, this paper is a useful step along the path.
To read Kevin Le Grand’s policy paper in full, “UK workplace pension design – who should carry the risk?” please visit here
The paper covers the following topics in depth:
• Origins of the current crisis
• The search for ‘value for money’ – the demise of DB, rise of DC
• Why current pension scheme designs are under review
• Possible ‘in between’ design structures
• Defined ambition in the Netherlands – a solution for the UK?
• Risk-sharing between employers and members
• Which way forward?
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