Your Industry  

Government support for workplace pensions

The government’s stated aim on defined ambition is to reinvigorate workplace pensions.

The government has recently released a white paper setting out their proposals, which are similar to the Dutch regime, and are currently consulting with the industry on the pros and cons of these.

John Reeve, senior consultant at Premier Pensions Management, says the government recognises the state pension system is not sustainable and so it needs to encourage individuals to save for their retirement.

Article continues after advert

In this respect, he says the government states it remains committed to all types of pension arrangements and that it is keen to create a regulatory framework in which all three types of arrangement can flourish.

However, Mr Reeve says it recognises that the risks for employers associated with defined benefit arrangements are enormous and that companies are less likely to offer such arrangements in the future.

He says legislation has therefore been focused around increasing the attractiveness of defined contribution arrangements.

Mr Reeve says: “In the past DB arrangements have been far superior to their DC cousins and this has led some who have no access to a DB pension not to save at all.

“The changes announced in the 2014 Budget and since have tilted the playing field the other way and made DC far more flexible and attractive to members.

“Despite some of the comments to the contrary, the government’s hope is that the increased attractiveness of DC will encourage saving for retirement and that, when they get there, people will be sensible and will not spend it all at once.

“Only time will tell whether this is happens.”

On defined benefit schemes, Jamie Jenkins, head of workplace policy at Standard Life, says the government is looking at ways to ease the regulatory burden for employers while still protecting scheme members.

On defined contribution schemes, Mr Jenkins says the government is working with the industry to set minimum standards and governance on workplace pensions for auto-enrolment while aiming not to restrict innovation in order to support good outcomes for members.

Ultimately the government has been inconsistent on their views on defined ambition, says David Brooks, technical consultant at Broadstone.

However, in recent times, Mr Brooks says there has been a strong desire to create a regulatory framework to allow them to be established.

He says the questions over the appetite for employers to do this and their effectiveness in reality remain answered.