Defined ambition is a new type of workplace pension proposed by the Government.
If you have a defined contribution pension, you will not know how big your pension pot will be or what income you will be able to purchase with it, until you open it.
If you have a defined benefit scheme, you are promised a certain amount of pension when you retire. However, your employer will not be able to predict with any accuracy how much this will cost them to provide.
However, with the new proposal, defined ambition pension would share the unknowns more fairly between you and your employer. There are lots of different ways to do this. For example, your employer could promise you a minimum size of pension pot at their selected retirement age; you would still not know how much retirement income it would buy when you open it, but at least you would know the minimum that would be in your pot.
Defined ambition pensions are still very much being thought about and discussed. There would need to be some changes to pension’s law and regulations before employers would be able to set up any defined ambition types of workplace pensions for their employees.
If you would like to read the Pensions Minister's paper on 'reinvigorating workplace pensions' you can download a copy by clicking here.
Where can I find out more?
If you need more information, please contact us. A pension specialist from our team will be happy to help with whatever pensions-related question you have. Our help is always free.