Former pensions minister Steve Webb has said his ambition to introduce collective defined contribution (CDC) schemes in the UK remains viable despite the Liberal Democrat MP no longer being in government.
Webb was pensions minister in the Conservative-Liberal Democrat coalition for five years before losing his parliamentary seat as the UK returned a Conservative majority government last month.
Speaking on his ‘defined ambition’ (DA) project that saw legislation for the introduction of CDC schemes pass two months before his exit, Webb said it was a “slow burner” and that work could continue in his absence.
Defined ambition originally included ideas to weaken the defined benefit (DB) regime or create DC schemes with guarantees before eventually settling on a new CDC system.
Despite the fact DA began with Webb’s Liberal Democrat team, he said the now entirely Conservative-led Department for Work & Pensions (DWP) could still move the policy forward.
“It may not be the first priority – there are more pressing ones,” he said. “But departments can do things in parallel.”
Webb said the CDC and DA policies were not academic exercises, and that, even with weaker trade unions than in the Netherlands – where the system was originally developed – there was still vital support for the system.
“It was always for the long term, and that work will continue,” Webb told IPE.
“The detailed work on producing regulations and consulting on them was always going to take a couple of years.”
Support from the main trade unions was very helpful in pushing the policy forward, Webb said, as were industry participants “motivated to making it happen”.
“It was not just an academic exercise or government putting out rules and regulations and then no one doing anything with it,” he said.
“There are professional people in the industry, trade unions and others, who want to see something less volatile than individual DC, particularly in sectors DB-dominated.”
In March, the DWP Select Committee, a group of MPs charged with scrutinising pensions policy, called for a halt on the diversion of government resources to the introduction of CDC.
The committee said the government department should focus on completing the implementation of auto-enrolment and wait until the current DC market was operating effectively, before considering CDC.
Webb, who also worked alongside the Conservative-run Treasury to implement the at-retirement freedoms in the individual DC market, said the government should keep a close eye on value for money and the practicalities of new products entering the market.
He previously dismissed ideas on creating an at-retirement default withdrawal system, but conceded this may be necessary at a later retirement point.
“It is good to give people financial flexibility in their early 60s, but the question is whether we want people to have to make active financial decisions throughout what could be a 30-year retirement,” he said.
After the Conservative majority took office, Ros Altmann was named the new pensions minister after being given a peerage and a seat in the UK’s upper parliamentary chamber, the House of Lords.