A Private Pensions Bill, introducing collective defined contribution schemes to the UK, was the centrepiece of todays Queens speech, the last before the general election.
In a joint statement ahead of the state opening of Parliament today, Prime Minister David Cameron and the Deputy Prime Minister Nick Clegg claimed that the coalition was making the 'biggest transformation in the pension system since its inception' by allowing workers to pool their money into Dutch-style CDCs.
As well as making provision for CDCs, the new Bill will put the pension 'guidance guarantee' announced in the March Budget on the statue book. It will also define the three models of pension scheme - defined benefit, defined contribution and defined ambition - by the 'pension promise' on offer.
'It would establish three mutually exclusive definitions for scheme types based on degrees of certainty in the benefits that schemes offer members,' a government briefing on the prospective Bill stated.
A separate Pensions Tax Bill will change the tax rules on pension pots announced by the chancellor in the Budget and allow savings to be withdrawn at marginal rates of income tax.
Commenting on the Queen's Speech, Nick Salter, president-elect of the Institute and Faculty of Actuaries, said any additional flexibility available to pension scheme members and employers was welcome. However, he sounded a note of caution over the pace of change.
'Change, particularly a great deal of change over a relatively short period of time, must be carefully considered to avoid unintended consequences.
'Collective schemes will present challenges - not least that of a "part promise". We look forward to working with the government to overcome these challenges, and to ensure that collective/defined ambition schemes are properly designed and that savers are provided with appropriate information to help them make informed decisions to encourage them to save in the most appropriate way for their later life incomes.'
At the National Association of Pension Funds, chief executive Joanne Segars said: 'CDC schemes potentially offer employers increased flexibility and choice in how they can structure pension schemes to benefit members by providing pooled risk, smoothing, and greater certainty. This is to be welcomed.'
But she added that the 'real goal' was for the schemes to be operating at scale.
'Scale is necessary precondition for CDC but it also enables a much wider range of member benefits,' she said.
'As a result of automatic enrolment we are already seeing the emergence of large pension schemes in the form of master trusts, which are able to offer their members high quality investment strategies and great value for money.'
Bob Scott, honorary secretary of the Association of Consulting Actuaries, said the government's defined ambition plans were a 'missed opportunity' and should have included flexible DB-type schemes as well as CDCs.
'Our research in 2013 showed employer support for DA legislative reforms that would permit flexible defined benefit schemes, enabling firms interested in offering employees a solid defined benefit guarantee into the future to so do,' said Scott.
'Unfortunately, with this flexibility now apparently ruled out for the foreseeable future, we can expect more private sector employers to close their existing defined benefit schemes to new and, increasingly, existing members and to make radical pension changes over the next two years to cap their pension liabilities.'
