09 February 2012
Pensions minister Steve Webb has proposed the creation of a new
hybrid pension scheme that would not be subject to the same strict
regulations of defined benefit schemes and offer employers more
flexibility to react to market conditions.
Mr Webb floated the proposal for defined aspiration pensions in
a recent speech to the National Association of Pension Funds.
He says the government is looking to encourage employers to
offer a "third option", as many companies continue to close their
defined benefit (final salary) schemes in favour of a defined
contribution scheme, where retirement income is not guaranteed.
Mr Webb said the defined benefit rulebook, which forces
companies to adhere to strict funding requirements and contribute
to the Pension Protection Fund, could be relaxed for defined
aspiration schemes.
He said: "This type of pension could sit within a less
burdensome regulatory regime and give businesses the freedom to
offer the type of provision that works best for their
employees.
"A defined aspiration pension could allow employers to offer a
measure of security to their staff, but would have a degree of
flexibility that would recognise when external factors - be it
increases in longevity, or significant changes in market conditions
- make a firm promise impossible to keep."
Mr Webb said defined aspiration pensions would give employees a
"greater sense" of what they will get in retirement than defined
contribution schemes.
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