UK - As pressure mounts on the UK government and opposition parties to find a way to solve the looming pensions crisis, Mike Fosberry, director, Smith & Williamson, has questioned whether the solution should be politically driven at all.
Speaking to delegates at the CIMA pension debate in London, he said: “The state cannot and will not provide in the future, given demographics. I question whether the solution should be politically driven at all. We have a Pensions Commission – why not let that continue into the future?”
Fosberry said a strong basic state pension system enhanced through means-testing for the needy, phasing out of the earnings-related state pension, increasing tax relief on pension contributions and relaxation of the rules to allow earlier access to pension fund money were essential parts of the solution.
People needed to be encouraged to save more through education and simplification, he added.
“We need to cut down the regulation and red tape,” he said. “The ‘hot potato’ of compulsion is an option but I’m not sure it’s the right one.”
Tesco finance director Andrew Higginson pointed to “short term expediency” as one of the problems with the way companies are handling pension fund management.
“We have a subject that is measure over decades - yet management is measured over the short term,” he said.
Against the grain of most UK companies who are increasingly looking to defined contribution schemes in dealing with pension fund deficits, Higginson said Tesco has moved 60,000 employees into defined benefit over the last three years.
In the 1990s, Tesco reviewed its pension arrangements with the aim of finding a single solution to manage the cost and risk to the business and the best outcome for employees, he said. The company developed a DB scheme based on career average salary, which now has a take up rate of 97%.
“DB is right for our business today,” he said. “We believe you can manage the financial risk by combining scheme design with appropriate funding from employers and employees.”
Smart Pension has absorbed more than 6,500 members from the Corporate Pensions Trust (CPT) after its trustees decided not to apply for authorisation.
The Defined Contribution Investment Forum (DCIF) has reappointed Vivek Roy as chairman for 2019 following a vote at its annual general meeting last November.
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