Pensions simplification is one step closer to becoming reality as the Association of Consulting Actuaries (ACA) stated it had received "a lot of support" for its proposed model scheme.
Speaking at the ACA’s annual dinner last night (May 9), chairwoman Jenny Condron told attendees from across the pensions industry and financial services that "advancing pension benefit simplicity is one of the priorities I set myself".
She said: "Rather than every scheme developing their own version of simplified benefits, the ACA has proposed a ‘model scheme’ that could be adopted industry-wide.
"We are working with scheme sponsors, chairs of trustees and professional trustees to encourage its adoption."
In November the ACA and Royal London called for the simplification of defined benefit rules in a paper titled Simplifying pension benefits – is it time for the Pensions Pound?.
In the paper ACA and Royal London set out how a simplified benefit structure might look.
They suggested two possible benefit increase options before retirement: nil, and in line with CPI, minimum 0 per cent, maximum 2.5 per cent per annum.
While for after retirement the paper put forward three benefit increases options, "with benefits converted to the increase most similar to that currently in place".
These were the same as the 'before retirement' options but with the addition of in line with CPI, minimum 0 per cent, maximum 5 per cent per annum.
The paper followed calls from across the industry for standard rules to help the DB transfer process as DB transfers soared and stressed simplification would not mean a reduction in the expected value of member benefits.
What's more, in October 2018 the High Court ruled Lloyds bank scheme trustees must equalise benefits between women and men who have GMPs because of contracted out benefits.
The ruling was considered a solution for a pension problem spanning almost three decades, and schemes are now having to decide how to equalise the contracted out benefits of their members.
At the ACA annual dinner, Ms Condron said: "With the catalyst of GMP equalisation and conversion, the industry has the opportunity to achieve material simplification of the DB pension promises made and upon which still so many depend for their retirement security."
She warned that pensions administration was "creaking under the pressure of schemes’ unscalable complexity, with the potential for slow delivery and incomprehensible paperwork issued to members at the point they most need clear guidance from the industry".
While Ms Condron called for the sector to be "bold" in helping others understand the impact GMP conversion could have on the delivery of simpler DB pensions, she also told attendees it was an enormous challenge that would not be quick.
She reminded attendees that pensions taxation was her second area of focus as chairwoman of the ACA, and referred to the current tax debate around the NHS pension scheme, which has been blamed for a decline in GP numbers.
"We are operating in an environment where few of us can simply explain how the pensions tax system will impact any individual, now or at retirement," Ms Condron said.