UK – The Department for Work & Pensions (DWP) has a "clear responsibility" to help defined benefit (DB) sponsors deal with the end of contracting out after it brought forward state pension reforms by a year.
Publishing a report as part of its pre-legislative scrutiny of the UK's single-tier state pension reforms, the work and pensions select committee also noted that the revised timetable would "place even more pressure" on the department to develop its defined ambition proposals.
The committee was critical of chancellor George Osborne's announcement in mid-March that the government would bring forward the launch of the new state pension to April 2016 – in line with plans when the state pension white paper was first published in 2011 – saying it was hampered in its work after being kept in the dark about the change.
In the final report, the committee noted that the new date was announced a week after its last evidence session with pensions minister Steve Webb had taken place, meaning it was not possible to solicit the industry's views about the impact of a "major" policy shift.
Committee chairman Dame Anne Begg was more forceful in her criticism, noting that the process of pre-legislative examination was "vital" to allow for rigorous and effective scrutiny.
"I am disappointed that the government has hampered us in carrying out this task, by giving us very little time to do it, due to the delays in its own timetable for publishing the proposals, and then making a major change to the policy at a very late stage," she said.
The Labour MP added: "Such a cavalier attitude to the scrutiny role of select committees is unacceptable."
The report concluded that government had "sprung" an earlier implementation date on employers, having previously appeared open to its concerns about the impact of the reforms – such as the end of contracting out.
"We believe it is therefore the government’s clear responsibility to work with these key stakeholders to ensure that the transition to the ending of contracting-out is as smooth as possible and that already beleaguered defined benefit private sector occupational schemes do not suffer further adverse consequences," it added.
Contracting-out will end in 2016, as the state pension reforms will abolish the current state second pension (S2P), merging the state pension with the system's second pillar. Employers will be offered a statutory override, allowing them to amend scheme accrual rates to claw back the 3.4% higher national insurance contributions resulting from the change.
However, critics have warned that if the reforms are implemented badly, it could lead to further DB fund closures.
Webb has previously dismissed such claims, insisting that the end of S2P will not have a "seismic" effect on DB funds, as the industry faces other problems.
The report also briefly touched on the potential introduction of defined ambition plans, a 'third-way' pension fund which Webb hopes will allow for greater risk-sharing than currently possible in defined contribution funds, but a lesser regulatory burden than imposed by DB schemes.
"It is clear that the government's revised implementation date [for the state pension] will place even more time pressure on DWP to develop its defined ambition proposals," it said.
The committee also pledged to "explore the potential" of such plans in a forthcoming report on best practice in workplace pensions.