The Association of Consulting Actuaries (ACA) and the National Association of Pension Funds (NAPF) have both welcomed the announcement by UK Treasury Minister, Melanie Johnson MP, that there is to be a task force established by the Government to simplify rules for defined benefit schemes.
The ACA has advocated the need for such a review as more organisations throw in the towel of defined benefit provision due in part to regulatory overload.
The ACA is also looking to support the work of the task force by providing a member of the group from a consulting firm. It is anticipated that the work of the group will result in easier-to-run defined benefit schemes from November 2002.
The ACA says that it hopes the project will also look at removing anomalies that exist in pension rules, and ways in which increased flexibility can be introduced in relation to early retirement.
Mike Arnold chairman of the ACA said: This is clearly good news as there is mounting evidence organisations are moving away from defined benefit arrangements, one of the main reasons being regulatory burdens imposed by Governments over many years. It is to be hoped that the group can also look at low-cost changes, as well as cost-neutral ones, so the Government of the day can also consider implementing wider changes if the Treasury can be convinced. A cost-neutral collar will need to be approached flexibly by Government if there are to be meaningful changes that will convince employers to stick with defined benefit schemes and the pension promise these schemes require.
The National Association of Pension Funds (NAPF) has also welcomed the announcement and has has for many years asked for drastic simplification of the rules believing that they were based on the premise that people join their pension scheme to save tax rather than to save for their retirement.
Alan Pickering NAPF chairman said: It is excellent news that the Government has now acknowledged that regulation is counter-productive and a discouragement to save for retirement. Melanie Johnson’s announcement will make it a lot easier for people of modest means to save for their retirement and enjoy old age free from poverty.
The existing rules have often prevented schemes from giving increases that they could afford to poorer pensioners,” he said.
It is a red letter day for pension schemes and their members. We will leave no stone unturned in ensuring that this important project is completed on time added Pickering.
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