UK government on wrong pensions track survey finds
UK – Pension funds believe that government policy is moving in the wrong direction for both occupational and state provision, according to the Association of Consulting Actuaries’ Pension Trends Survey 2005.
Over two thirds (68%) of pension funds responding thought the government’s policies on occupational schemes were wrong.
And 62% said that the 2004 Pensions Act, which came into force on 6 April, would reduce occupational pensions provisions, while 82% said it would increase their costs – the opposite of the government’s stated intentions.
The survey, to be released later this month, was conducted in January and February among 390 pension schemes, with assets exceeding £131bn (€193bn) and over 2.8m members.
A majority of pension schemes also said they wanted the flexibility to reduce scheme costs retrospectively and even suspend inflation indexation if the scheme was in deficit. Almost all respondents said reform of the state pension system was essential.
Adrian Waddingham, chairman of the association and partner at consultant Barnett Waddingham, said: “The word ‘crisis’ is reasonably used to describe the current system of pensions arrangement and regulation in the UK as it implies that things used to be better, which they were as there were more tax incentives to companies and flexibility if they got into trouble.
“It used to be that consultants could, with hand on heart, recommend companies to set up an occupational pensions scheme, but it is not possible to do so now as they would be taking on horrendous long-term commitments.
“Proposed reforms are sadly lacking in all three election manifestos and the Pensions Act has been a nonsense and not encouraged pensions provision.”
He added, however, that most firms acknowledged that certain measures in the act, such as the introduction of the Pension Protection Fund, might bring added security to current members of defined benefit schemes.