Legislation stifling pensions initiatives
Legislation stifling pensions initiatives
There are calls for the next Government to revive ‘the middle ground' by amending restrictive pensions legislation.
Consultancy, Mercer, is expressing its concerns about the development of alternatives to DC and DB being hampered by restrictive legislation, and is recommending a review of three areas of scheme design: the removal of mandatory indexation of benefits, the ability to vary pension payments and consideration of how PPF should apply to alternative risk-sharing schemes
The consultancy believes that the middle ground in pension scheme provision - the sharing of risk between employer and employee - will fail to develop as a logical alternative to traditional defined benefit (DB) and defined contribution (DC) schemes if the legislation remains unchanged.
To ensure that future generations of employers and pension scheme members are not exposed to the volatility created by accounting rules on the one hand and the vagaries of investment markets on the other, more emphasis should be put on the middle ground. However, the UK's complicated and over-prescriptive legislative regime means that many workable designs that are being embraced in Europe will not be considered by UK employers.
"It is undeniably important for companies to move to reduce their pension risk exposure and rising costs, but in the stampede to more affordable pensions, DC has by default taken pole position while the middle ground has limped on in pursuit, hobbled by inflexible legislation," said Chris Sheppard, a principal at Mercer. "Such middle ground solutions more fairly balance the risk and reward trade-off between the employer and employees."
27 November 2009
Created on: 27-Nov-09 13:59
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