DC members save towards “soup kitchen” - Tomlinson
UK - Current defined contribution schemes will not provide sufficient means for members in retirement, Lindsay Tomlinson, vice-chairman of Barclays Global Investors, told delegates at the NAPF investment conference in Edinburgh today.
"Currently DC scheme members are targeting a soup kitchen not an adequate replacement of income in retirement," Tomlinson said, stressing that he was giving his personal view. "We currently have plainly inadequate contribution levels heading to inadequate retirement provision."
He warned that the current gap in addressing governance in defined contribution schemes might lead to more insurance-type personal pensions taking over, and urged more brainpower to be put into thinking about governance in defined contribution schemes.
"Over the last six or seven years we have only looked into improving governance in defined benefit schemes. Similarly, all of the pension fund investment debate including alternative asset classes has been about DB schemes - because that is where the money is." However, he stressed that although the death of DB is exaggerated, DC is the future.
Tomlinson added that "the authorities believe in workplace pension but have not done a lot to promote it. There is a huge gap regarding this issue in the Turner report and in government thinking."
He also said that hybrid schemes might not be the answer as they are leaving exactly those risks with the scheme sponsor that are choking DB schemes.