The government is looking for the least disruptive way to introduce collective defined contribution (CDC) schemes and will consider 2011 legislation to phase in the new rules needed, the pension minister has said.
Pensions minister Guy Opperman (pictured) told the Work and Pensions committee today (14 February) the government was looking at ways to phase in statutory instruments without disrupting other schemes currently in the market.
One way of doing this was to look at changing the 2011 Act rather than the 2015 defined ambition act, he said.
The government is currently working with Royal Mail, which wants to create a CDC schemes for its members, which may be used as a test case for other schemes to come forward.
There are already a number of interested parties such as the Universities Superannuation Scheme (USS), the largest private sector pension scheme in the country, which said it wanted to press for legislation in the field.
But Mr Opperman denied any formal approach to the government has been made by the scheme.
CDCs are schemes that see an employer contribute the same each month but at the same time offers members a targeted payout after they retire.
Such schemes, which already operate in Holland but currently lack the underlying legislation needed in the UK, see risk shared among members, which typically come from across an industry rather than from a single employer.
Mr Opperman said: “There has been a small shift in a positive way. Understanding the 2015 Act and its complexity and utilising that act to resolve a CDC issue and what are the consequences of that is a real concern of the department.
“Trying to find a way of utilising the 2011 Act which is in a discrete way, is a definite positive shift. But there is still a long way to go.”
Ronan O’Connor, deputy director of private pensions policy at the DWP, who was also at the hearing, said the government based its thinking on reducing parliamentary time and creating the least disruption.
He explained the 2015 Act had defined schemes as DB (those based on the notion of a promise), DC (with no guarantee) and defined ambition, which meant risk sharing among parties but not members.
The next level down was collective DC, where risk is shared among members not between parties, he said.
But this did not have to overturn all other definitions, he said.
The 2011 Act, on the other hand changed the definition of defined benefit and money purchase.
The government is now considering whether it can use those powers to introduce a slightly different definition of money purchase.
Mr O’Connor said: “The challenge we’ve given Royal Mail and the challenge we’ve given ourselves is to look at the secondary legislation that we have and the powers we have to change that and to see whether we can either put the first phase of legislation in or to completely legislate to allow these schemes.