UK - Multi-employer and risk sharing plans will benefit from the demise of single employer defined benefit schemes, the conference heard.
National Association of Pension Funds chairman Terry Faulkner told delegates the number of open corporate DB schemes was dwindling, and predicted they might eventually only be available to public sector workers.
However, rather than convert purely to money purchase arrangements, Faulkner predicted that employers would turn to career revalued average earnings, cash balance or other scheme designs – ones which share investment risk with members.
He said: “Outside the public sector, we are seeing the demise of DB schemes, i.e. a scheme which is a promise to provide an income in retirement. It could be that we’ll actually move to a different type of retirement benefit scheme which shares the risk differently.”
Faulkner also believes multi-employer schemes will be the preferred option for small-to-medium size firms which want an alternative to defined contribution provision. He said these schemes would be particularly appealing as they would be cheaper – in terms of both fiscal and governance costs – than running standalone schemes.
He said: “Multi-employer schemes potentially could be very attractive as there is a problem in terms of cost and governance in single employer provision for SMEs. The solution might be to have one of these.
“I see the target audience being employers within a business park, region, an affinity group, or a trade union.”
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As a hectic 2018 draws to an end, Jonathan Stapleton wishes readers a quieter 2019.