Any move towards defined ambition pensions that encourage more risk sharing between savers and employers need major legislative reform, according to the honorary secretary of the Association of Consulting Actuaries.
Bob Scott said risk-sharing would require a 'separate and distinct' legislative framework, different to those in place for defined benefit and defined contribution pensions, in order to succeed.
Speaking at a National Association of Pension Funds event in London yesterday he said current government pension policy was 'in a complete muddle', with auto-enrolment and state pension reform among the issues on the agenda.
'The first stage would be for government to get its agenda clear and then set a realistic legislative framework for risk-sharing schemes,' he said.
ACA research had shown employers were willing to take on some of the risk involved in pension provision, but Mr Scott said 'they're wary of doing it given the legal and practical risks involved'.
For risk-sharing to succeed, it requires financial incentives from government and must also be 'future proofed' to ensure any change in policy by future governments does not affect employers who have pursued the option. It would also cross-party political support, he noted.
Schemes should also be given flexibility to raise their retirement ages in line with increases in the state pension age, and also in relation to the benefits they offer, such as not having to provide spousal benefits, he said.
At the same event, pensions minister Steve Webb said he had 'lots of exciting ideas' about how defined ambition pensions could be introduced. Alluding to recent visits to the Netherlands and Denmark, he said: 'There are countries that have done risk sharing and have done it well.'
Mr Webb echoed Mr Scott's emphasis on the legislative change needed for a defined ambition system to work. 'Our challenge is to create a regulatory framework for people who want to make a pension promise. Otherwise would put people off risk sharing,' he said.
