The pensions minister is to press ahead with plans to overhaul the private pensions market after results of a public consultation showed big support for the introduction of defined ambition schemes.
Following a lengthy, Reshaping workplace pensions for future generations consultation, the Department for Work and Pensions today published its reponse. Pensions minister Steve Webb said the document commiteed the government to developing DA. As such, a Private Pensions Bill will be laid before Parliament today.
Webb said: 'This coalition government has already made fundamental reforms to the pension landscape. These new proposals are all about encouraging a flourishing and diverse pensions market by providing greater choice to employers and savers.
'These reforms meet the needs and concerns of business while, at the same time, standing up for the interests of workers who are doing the right thing and saving for their retirement.
'With the backing of consumers and industry, this Bill will bring about new and realistic pension scheme options for those employers who want to do right by their staff.'
The Private Pensions Bill, announced in the Queen’s Speech last month, will enable employers to develop shared risk - or DA - schemes which offer more certain outcomes for their workers, while helping them to keep costs under control.
The new legislation will also allow the development of new collective pension (or Collective Defined Contribution) arrangements based on risk-pooling models. The DWP noted that these models were run successfully in countries such as the Netherlands, Sweden and Denmark.
The DWP added: 'Many employers have expressed an interest in taking forward these new models of pension scheme, once it becomes legally possible.'
David Hare, president of the Institute and Faculty of Actuaries (IFoA), welcomed today's DWP publication, but said more needs to be done to ensure the right structures were in place before DA becomes law.
'More work is required from the financial services industry, all areas of the government and employers to ensure that the right regulation, legislation and incentives are in place before DA and shared risk schemes can become a reality.
'The IFoA would also urge that consideration is applied to the self-employed, and that they can access an equivalent range of choices.
'We would also encourage the next stage of development of future pensions to include consideration of long-term care.'
David Fairs, chair of the Association of Consulting Actuaries said that, to successfully reinvigorate the pensions market, the government should overhaul the existing pension tax structure.
He said: 'The creation of a new risk-sharing structure is likely to start the creation of new and innovative pension arrangements. However, key to the development of new designs is an overhaul of the existing pension taxation structure which is overly rigid and complex.
'For companies to seriously consider introducing such arrangements, clarity around how the tax regime applies to risk-sharing schemes will need to be resolved quickly and not left until after the Bill has been passed.'
However, actuaries Barnett Waddingham said it was good to see the speed with which the Private Pensions Bill was progressing.
Partner Danny Wilding said: 'It's interesting to see that despite the negative response by many regarding shared-risk schemes, the official response to the government's consultation has shown that more than a quarter of employers may be interested in greater risk sharing as well as a clear preference from individuals for greater certainty over their finances.'
Philip Smith, PwC's head of defined contribution consulting added that there was 'no doubt that the current pensions landscape needed refreshing', but said the industry needed to be caution that too much hope isn't placed on CDC schemes.