Press Release
ACA SAYS ‘YES MINISTER’ TO RISK SHARING CONSULTATION, BUT ‘NO MINISTER’ TO MISSING OUT ON REFORM IN THE CURRENT PENSIONS BILL
22 February 2008: Yesterday, the Government opposed an amendment to the Pensions Bill that would have added a new clause ending the ban on employers being able to offer new conditionally indexed pension schemes.
The amendment was proposed by the Association of Consulting Actuaries (ACA), with advice on the legal aspects provided by the Association of Pension Lawyers (APL), and was the culmination of work undertaken over the last 2 years in developing an initiative to re-invigorate quality workplace pensions in the UK.
Commenting on the Pension Minister’s (Mike O’Brien) rejection of the amendment, Ian Farr, ACA Chairman said:
“The Pensions Minister opposed the ‘conditional indexation’ amendment in the Bill Committee, whilst mounting few arguments against the initiative. Indeed he said (to quote) ‘I do not disagree a great deal with the general argument put forward by the Opposition spokespeople’. Instead, the Minister said he favoured a slow-moving consultation on the various approaches to risk-sharing starting in June - a 4 month delay in getting anything moving so all reforms would miss this year’s Bill.
“Why cannot the Minister organise a quick final consultation to fine-tune the legislation removing the ban on new conditional indexation schemes as a ‘first’ step in risk sharing reform to be included in this year’s Bill? After all, the idea has already been exposed to a consultation exercise in the last year as part of the deregulatory review of private pensions. Many key features of the personal accounts regime are still under consultation, but the Bill clears the way for these measures to be introduced. Other less well developed risk sharing options can then be exposed in a slower moving consultation exercise as proposed by the Minister.
“It is encouraging that both Conservative and Liberal Democrat members of the Pensions Bill Committee supported the conditional indexation amendment. Hopefully, the Lords will apply pressure to make sure the amendment will still find its way into this year’s Bill and Act.
“Unfortunately, if this legislative opportunity is lost to remove the ban with no certainty of another Bill in the near future, it is expected that the decline in DB types of arrangements, coupled with the need of employers to review their pension offerings in the light of auto-enrolment and personal accounts, will mean the near wholesale switch to DC will be completed in a matter of a few years. Once done, the switch back to any form of risk sharing may be slow and difficult – with generations of private sector employees paying the price of a missed opportunity in this Bill”, added Ian Farr
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