UK - The Association of Consulting Actuaries (ACA) has called on the government to lift the ban on conditionally indexed pensions in order to slow the retreat from defined benefit (DB) schemes.
Ian Farr, ACA chairman, said the government could not reverse the trend back to DB as the costs of providing the schemes remained too high, but its imminent deregulatory reforms could help provide a middle way for employers.
He said: “The ACA has provided a blue-print to ministers on how the existing defined benefit legislation can be amended to remove the ban on employers from offering conditionally indexed pension schemes.
“This is the prevalent type of scheme in the Netherlands and much preferred to defined contribution arrangements in that country.”
Farr explained how under conditionally indexed pension schemes the level of pensions would be geared to average career earnings with a revaluation before retirement. Pensions being paid at the time would be indexed annually with the whole outcome conditional on the health of a scheme’s finances.
Farr asked: “Why in the year 2007 would a government want to ban employers from providing this type of pension when it has the legislative opportunity to encourage this new flexibility?”
The ACA 2007 Pension Trends survey showed 72% of employers wanted the government to facilitate the establishment of risk sharing schemes.
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