Defined ambition plans attacked for poor timing

Steve Webb, pensions minister, said the bill would provide a “new legislative framework for defined ambition pensions”.

According to the bill, this framework will enable employers and their workers to share risks, providing greater certainty for savers and controlling costs for employers.

The bill will also encourage “collective schemes”, which Mr Webb said were “popular in many countries around the world” as the pooled risks can make pension outcomes more stable.

According to independent research on defined ambition pensions, commissioned by the Department for Work and Pensions to come out alongside the Pension Schemes Bill, consumers said they valued greater certainty in pensions.

More than 25 per cent of employers said they would be interested in offering a pension involving risk sharing.

Joanne Segars, chief executive of the National Association of Pension Funds, said it was “right” that employers are given greater clarity on options for risk sharing, but she admitted that the industry faced a “busy period” dealing with widespread upheaval in the pension market.

David White, managing director at Creative Auto Enrolment, said: “Employers are already struggling to get to grips with pensions and with such rapid change in the pensions market, the DWP needs to clearly communicate these pension changes to employers if the reforms are to be a success.

“It is essential that businesses understand the options available to them to avoid causing even more confusion.”

Advisers, however, were unconvinced over the timing of the announcement, coming on top of the government’s response to the workplace pension provision enrolment

Alan Higham, founder of Buckinghamshire-based Retirement Angels, argued that promoting defined ambition schemes was a “vanity project” for the government that threatened to overwhelm schemes and employers.

He said the industry might struggle to cope amid a raft of legislative changes already in motion, such as the single state pension age, the introduction of auto enrolment and the shake-up of pensions access announced in this year’s Budget.

He said the scheme could be “parked” for five or even 10 years and clients would not suffer from adverse outcomes in the meantime.”

Tom McPhail, head of pensions research at Bristol-based Hargreaves Lansdown, agreed. He said: “This is a moderately good idea being delivered at a particularly badly timed moment. We have yet to come across a single employer that has confirmed it definitely intends to introduce one of these new schemes for its employees.”