Webb unveils plans for 'defined aspiration' pension consultation
UK - The UK must explore the possibility of a "third-option" pension scheme in an effort to introduce a measure of cost-sharing into retirement savings, pensions minister Steve Webb has said.
Speaking at the National Association of Pension Funds (NAPF) chairman dinner last night, the minister highlighted what he regarded as the "absurd" situation whereby any form of pension guarantee immediately meant the scheme was classified as defined benefit (DB).
Saying it was time for a "frank and open debate" on how to encourage the continued existence of good-quality occupational pensions, he instead suggested a shift away from the "strict divide" between DB and defined contribution (DC), asking if there was a third option that could balance the needs of employers and employees.
"A 'defined aspiration' pension could allow employers to offer a measure of security to their staff, but would have a degree of flexibility that would recognise when external factors - be it increases in longevity or significant changes in market conditions - make a firm promise impossible to keep," he said.
Webb has long spoken of his desire to introduce greater risk-sharing, last year telling the NAPF's annual conference in Manchester he wanted to "facilitate" any return to a pension promise or guarantee in wake of the country's shift to DC.
The use of 'defined aspiration' echoes language used in Europe - with the concept of 'defined ambition' repeatedly debated as a DB replacement in the Netherlands in recent years.
Webb gave several reasons for his interest in the new system, saying last night: "At the moment, we have an absurd situation where, if an employer attempts to offer more certainty, it is immediately classed as 'defined benefit' and then subject to myriad regulations and restrictions.
"Employers are increasingly giving up in the face of these obligations. They should not be forced to take on a burden that could put their business at risk over the longer term."
He said employers should be able to offer pensions within a "lighter-touch" regulatory regime.
The minister's comments will have been welcomed by NAPF chairman Mark Hyde Harrison, who spoke of the need to consider all existing pension regulation as part of the government's pledge to reduce the regulatory burden.
Hyde Harrison said there was "plenty of scope" to cut regulation and called on members to highlight any areas requiring change.
"We plan to cast our net widely - we will be looking at legislation from across Whitehall, and we'll be looking at where EU legislation has been introduced but is gold-plated," he said, adding that it was important to rectify any past regulatory mistakes.