UK - Consultants are split over the viability of a popular US-style DC plan partly based on company profit.
The plan uses a standard DC vehicle as its base – with fixed contribution rates by staff and employer. Additional payments into the scheme are based on company results.
Society of Pensions Consultants president Donald Duval said companies operating this type of plan can avoid being taxed on the bonus payments which will be directed straight to the pension scheme.
Employees would also miss a National Insurance levy by channelling extra pay into a pensions vehicle.
Duval said there was a lot of discussion among UK consultants surrounding the DC hybrid schemes which are fashionable in the US.
But he warned that simply taking a US-style DC plan and applying it to the UK workplace was not always a route to success.
“In the US it is easier to get access to your money than it is here, and people regard pension schemes more as general savings, rather than specifically pensions.”
And Watson Wyatt senior consultant Andrew Cheseldine doubted whether the arrangement would have the “motivational effect that you get when you have bonus-related cash payments”.
Jardine Lloyd Thompson technical director June McIntosh – who is actively approaching the performance-related DC plan – said UK pension funds typically followed by example.
But she added: “There are not many companies that will do anything terribly innovative.
“Straying into something more adventurous is not the norm at the moment.”
Canadian manufacturer St Gobain’s UK subsidiary is one of a handful of employers currently running this type of DC plan.
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