Have your say in a consultation on the future of workplace pensions.
On 7 November the government published a consultation relating to workplace pensions entitled Reshaping workplace pensions for future generations. The consultation is open for responses until 19 December.
The consultation covers the following main areas:
- Proposals to make it easier for employers to sponsor new pension schemes where benefits accrue on a specified basis such as being related to salary.
- Proposals to allow additional flexibilities for future accruals such as:
(a) removing requirements to index-link pensions in payment
(b) making it easier for schemes to change pension age in order to cap costs that stem from improved longevity, and
(c) allowing employers to cease to bear the financial costs and risks for people who leave their employment.
- Discusses providing greater certainty for members in defined contribution schemes without any funding liability on the employer’s balance sheet. A number of models are set out which provide security against the different types of risks in pension vehicles such as capital, investment returns and conversion risk.
- Discusses a model of collective risk sharing that could provide a guaranteed pension income.
- Discusses options for collective risk sharing between members without a guarantee or promise.
- Discusses the options for legislation to bring in the new type of pension called ‘defined ambition’ pension (DA). Discusses the interaction with the planned commencement of the revised definition of money purchase benefits in section 29 of the Pensions Act 2011.
- Discusses the options for legislation to enable Collective Defined Contribution (CFC) schemes with and without guarantees, and considers how best to provide reassurance over concerns of future regulatory creep.
The government has proposed a new type of workplace pension, known as a defined ambition pension. The idea behind a defined ambition pension is to share the unknowns more fairly between the employee and employer. Defined ambition pensions are still at the planning stage. There would need to be some changes to pensions law and regulations before employers would be able to set up any defined ambition types of workplace pensions for their employees.
Post contributed by ACCA