Press Release

ACA Chairman and CBI Deputy Director General call for pension innovation

The Government’s Deregulatory Review of Private Pensions must lead to concrete and innovative reforms…
GOVERNMENT MUST ACT ‘WITH VISION’ AND BACK NEW GENERATION OF WORKPLACE SCHEMES
20 April 2007: The Government must back radical reform measures if it is to capture the imagination of employers, many of whom are looking for a clear lead over the direction occupational pension provision should take in the years ahead. Without that lead, backed by essential legislative reforms, there will be levelling-down in pension provision, particularly if the personal accounts regime goes ahead alone.
This was the message from Ian Farr, Chairman of the Association of Consulting Actuaries (ACA), at a major dinner attended by many senior figures from the pensions world, and also addressed by John Cridland, Deputy Director-General of the CBI.
“There is a real opportunity for Government to re-energise the provision of employer sponsored occupational pension schemes in the UK by providing a new 'third way'. New shared risk schemes are an important initiative in this direction and would sit comfortably between the existing defined benefit and defined contribution types of scheme,” said Ian Farr.
“Shared risk schemes will enable employers to control costs into the future even if there are down swings in investment returns and continued improvements in mortality. For members, the advantages will flow from a more stable benefit platform than money purchase provides and – we think importantly – regular indexation of benefits supported by the new prudent funding regime.”
Supporting new innovation in occupational provision, John Cridland, Deputy Director-General of the CBI added:
“Looking to the future we also need more choice and innovation in occupational provision. Fresh ideas like shared risk schemes are to be welcomed at a time when so many companies are reviewing their pension arrangements in the light of the forward risks those schemes present to their ongoing business. Innovation will need to encompass public sector pensions, where the
Government has to seek with greater determination a sustainable new settlement that is seen to be fair to taxpayers and private sector employees.”
The ACA has put forward a package of reforms to the Deregulatory Review of Private Pensions and has in particular argued that new shared risk schemes could work to fill the gap being left as final salary defined benefit schemes close to new entrants and increasingly future accrual. The ACA says that it is vital such schemes are encouraged by legislative reforms in the 2007/08 session of Parliament, in advance of the introduction of personal accounts (See Note for Editors for further details).
A paper on Shared Risk schemes and a Questions & Answers briefing are available on the ACA website at www.aca.org.uk (see ‘Policy Statements’)