Commenting on the Pensions measures announced in today’s Queen’s Speech, Mike Smedley, Pensions Partner at KPMG in the UK, said: “The Government has been floating ideas about risk-sharing in pensions or ’defined ambition’ for some time now, so it’s good to see it come to fruition in the form of a Bill.
“While these new fangled pension schemes won’t be for everyone, they can work well in some situations. In principle they can deliver better outcomes for savers than conventional DC pension plans, but at the cost of some extra complexity.
It remains to be seen how much appetite there is from employers/providers and savers alike; the market will take time to adapt to the new flexibility and whether for example mirroring the Dutch model is the right way to go. A key challenge for government will be balancing the regulatory requirements and ensuring savers understand the benefits and risks of such a scheme – but without strangling the whole idea at birth with red tape.
“One slight disappointment is that flexibility to change benefits provided by defined benefit plans that were suggested in the consultation last year for existing defined benefit plans does not get a mention. This presumably means that they will not be pursued and that Government has resigned itself to the long-term decline and eventual extinction of defined benefit in the private sector.
“Also mentioned in the Speech is a bill to facilitate the flexibility announced in the Budget – so that members have complete control over how to spend their pension savings. Crucially we are waiting on the Treasury consultation process to find out whether this will be confined to defined contribution plans or whether we’ll get a level playing field for defined benefit schemes too.”
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This article represents the views of the author only, and does not necessarily represent the views or professional advice of KPMG in the UK.