The Department for Work and Pensions (DWP) will issue a green paper on the future of defined benefit (DB) schemes in early 2017, the pensions minister has confirmed.
Speaking at the Eversheds annual pensions conference on 1 December, Richard Harrington said the consultation exercise will begin in January.
"Everyone knows the problem but it's very hard to suggest solutions," he said. "It is the government's role to find out from everybody's opinions a clear direction. The purpose of the green paper is to lead with ideas and suggestions, but not say ‘we know this'.
"My aim is it will be in the first few weeks of next year. [We will be] trying to review the whole of the DB [sector] and consider ourselves where there are things that government can do to tweak - or more than tweak if necessary - the environment of DB schemes."
Harrington confirmed the green paper will explore valuation and investment systems, and whether the systems should more often consider alternative investment vehicles, instead of gilts.
He also added the consultation process will consider the price inflation index used by schemes, although said he was not "wedded to one particular system or another".
The minister also confirmed the government would consider the practicalities of scheme consolidation.
"The great nirvana of everything is consolidation," he said, "because of management costs and charges, because smaller amounts of money cannot be allocated as easy to specific investments. Sometimes, there is not enough money to do it but it is also difficult to hire people."
Harrington went on to say that the government believed the secret to engaging more people with pensions and building on the success of auto-enrolment (AE) was to encourage a feeling of "ownership". He compared the pensions environment between the US and the UK.
"Our priority must be to get personal ownership of pension plans for people in a way that they understand," he said. "[In America], people talk about 401Ks in a way that Brits talk about house prices. The fact is, they feel ownership of it.
"This is our main objective, as far as I can see, for auto-enrolment. The disadvantage of the DB schemes is that people didn't have to think about it worry about it much. They didn't need to know what was going on at the time.
"Whereas for auto-enrolment, they do. The real message is getting people to feel ownership of their pension. It's their pension, it's not their employers, it's not the government's.
"This is a big battle."
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