Government consults on defined ambition pensions

The government has published a consultation into its defined ambition pension scheme.

The Department for Work and Pensions (DWP) introduced its proposals for a defined ambition pension in November 2012 in its paper, Reinvigorating workplace pensions.

The defined ambition pension is designed to reshape workplace pensions for future generations, create more certainty for individuals, share investment risks more equally and help employers to continue to offer the best possible workplace pensions.

The consultation, Reshaping workplace pensions for future generations, sets out a range of proposals, including:

  • Creating a new pensions regulatory framework that would allow for greater risk sharing between parties, which could include employers, members, and insurers and investment managers.
  • Removing regulatory barriers to allow for a new flexible form of defined benefit (DB) pension that will enable employers to continue to offer pensions to members with a high level of certainty, but with much greater flexibility over the nature of benefits provided. These flexibilities will apply to future accruals only within existing DB schemes.
  • Enabling the development of new forms of defined contribution (DC) pension schemes that could provide more certainty for members about their pot or pension income while they are still saving, without adding to employer liabilities.
  • Enabling new models of collective DC schemes that could provide for risk sharing between members, increasing the stability of pension incomes. 

The consultation will run until 19 December 2013.

Steve Webb (pictured), minister for pensions, said: “I want people to have the best pensions possible, where risks are shared between employers and their workers.

“Final salary pensions have been in long-term decline and if we do not act could disappear altogether. We want to help the best employers offer good alternatives including new forms of salary-linked pensions.

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“We have looked at the best pension arrangements around the world and want to give British workers the chance to join such schemes.

”Our proposals for defined ambition pensions are designed to reinvigorate workplace pensions, providing people with more certainty about what they will get in retirement.”