DC saving labelled biggest problem for pensions industry

DC saving labelled biggest problem for pensions industry

The biggest problem for the pensions industry is defined contribution saving, not Brexit, according to Con Keating, head of research at Brighton Rock Group insurance group.

Speaking on a panel at the Westminister Employment Forum event on pensions policy in the UK, held at Glaziers Hall in London this morning, Mr Keating said: "The biggest single problem we are faced with is DC.

"DC isn't going to deliver on pensions. The point is we have seen 1.3m people on the streets just because DC pensions weren't at significant levels."

Article continues after advert

Mr Keating advocated moving away from DC as a savings tool, suggesting collective defined contribution, and a return to defined benefit schemes, as alternatives.

He also said he was in favour of a system which taxes savings on the way in, taxes gains, and taxes on the way out, as opposed to a taxed exempt exempt system or the current system of exempt exempt taxed - which means contributions are tax-free and so is growth in the pension but withdrawals are taxed as income. 

James Walsh, policy lead for the EU and international at the Pensions and Lifetime Savings Association said he had some sympathy with Mr Keating's views.

He said: "It would be great if we could get some kind of risk sharing models."

He added he was not as a pessimistic but that maybe a return to defined benefit would work favourably.

Defined benefit schemes have hit the headlines in recent months amid concerns some are woefully under funded.

The Work and Pensions Select Committee is currently undertaking an inquiry into the DB sector.

Committee chair Frank Field has argued plans must be put in place to allow stressed schemes to reduce member benefits before falling into the Pension Protection Fund.

However The Pensions Regulator has decried "screaming headlines" on the state of the UK's defined benefit pensions schemes, arguing instead that the majority will meet their obligations.

In particular, TPR executive director Andrew Warwick-Thompson said attention-grabbing reports of deficits as high as £1.5trn were misleading. A more realistic figure, he said, was £350bn to £400bn.