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The Actuary The magazine of the Institute & Faculty of Actuaries

Up the down escalator

In February, the government opposed an amendment proposed by the Association of Consulting Actuaries (ACA) to the Pensions Bill that would have added a new clause ending the ban on employers being able to offer new conditionally indexed pension schemes.

Commenting on pensions minister Mike O’Brien’s rejection of the amendment, Ian Farr, ACA chairman, said: “The pensions minister opposed the ‘conditional indexation’ amendment in the Bill Committee, while mounting few arguments against the initiative. He said, ‘I do not disagree a great deal with the general argument put forward by the opposition spokespeople’.

“Instead, the minister said he favoured a slow-moving consultation on the various approaches to risk-sharing starting in June – a four-month delay in getting anything moving, so all reforms would miss this year’s Bill. Why is it not possible for the minister organise a quick final consultation to fine-tune the legislation removing the ban on new conditional indexation schemes as a ‘first’ step in risk-sharing reform to be included in this year’s Bill?”

The loss of the amendment fed the growing gloom about the future of defined-benefit pension schemes, which are also threatened by new proposals from the Accounting Standards Board and the Pensions Regulator.

Aon estimates that the effect of these proposals would be to change the aggregate reported financial position of the 200 largest schemes from a current surplus of £20bn to a deficit of £180bn. Hence the view of The Economist that efforts to sustain schemes may be a case of trying to climb the down escalator.