20 February 2012
Steve Webb will push for adoption of Dutch-style schemes that
aim to offer more assurance than 'defined contribution' pensions
about size of retirement payouts.
Ministers will encourage companies to offer a new Dutch-style
pension to their employees, under urgent reforms sparked by the
rapid disappearance of final salary schemes and the increasing
number of people failing to save for their retirement.
Oil giant Shell became the last of the FTSE 100 companies to
close its "defined benefit" final salary scheme last month and two
out of three people in the private sector now fail to save at all.
If they offer anything, employers now tend to provide inferior
"defined contribution" schemes for their staff, that offer no
assurances about how much the pension will finally pay out.
In response to the crisis, pensions minister Steve Webb has told
the Observer he now wants to push companies into a new type of
pension known as a "defined ambition" scheme, currently being
pioneered in Holland, which offers savers some reassurance from
their employers on the size of their pension pot and even the rough
size of their income on retirement.
However, they would not be regulated by the state to the same
extent as final salary schemes, so the employer would have greater
flexibility in the event of fluctuations on the stock market or an
increase in life expectancy.
Mr Webb said "defined ambition" could mean a company saying: "We
are aiming for a pension of this sort, it will be in this range, we
can't give you an absolute guarantee but this is how we are going
to get this pension. And we will report back on how we are doing
and we might have to tweak, but this is what we are aiming
for."
He added: "I would rather know roughly what I was going to
get than have no idea what I was going to get."
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