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Webb pledges to 'facilitate' pension guarantees, risk-sharing in DC

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  • Webb pledges to 'facilitate' pension guarantees, risk-sharing in DC

UK - The UK's pensions minister Steve Webb has pledged to "facilitate" the re-introduction of risk-sharing, as well as of pension promises and guarantees in defined contribution (DC) schemes, with some initial proposals due early next year.

Speaking at the National Association of Pension Funds (NAPF) annual conference in Manchester yesterday, Webb stressed that he was not "trashing" DC schemes, and admitted that the recent past had seen great dislike of any kind of guarantee system for pension payments.

He said that if there was a "pendulum swinging back" in the next year or even the next 20 years, with greater appetite for guarantees - he would look to facilitate this.

The Liberal Democrat MP said that it was not sufficient that - if asked - the industry would not be able to tell DC scheme members what kind of retirement income they could expect.

"So I would like to facilitate as best I can any element of risk-sharing, any element of promise or guarantee," he said, adding that this could be achieved through regulation "if that's what it would take".

Asked to elaborate on his ideas, he said: "Am I going to make you introduce low-level DB? No. If I could find a way to make it easier if you wanted to, then am I interested in finding ways? Yes."

His comments follow on from those made by Lord Hutton earlier in the conference, suggesting that the UK should consider managed DC and that staying "very strictly" under the DC banner, schemes could begin to offer "some aspects" of what was previously associated with defined benefit (DB) schemes.

Turning his attention to management fees, Webb said that it was an issue he would also seek to address.

"It is one of these things where, if the industry can sort its own house, that's great - but if it can't, we're going to have to protect consumers."

"While good, engaged employers have got the benefit of scale and will choose good value schemes - and we believe NEST and the other entrants to the market will drag charges to a much better level than they have been in the past, " he said, "the worry is the tail of that distribution."

He emphasised that it was "not the mean, it's not the median, it's not the mode", but rather the final few percentage points of fees that concerned him.

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