UK - Occupational pensions provision is "close to crisis" and the willingness of employers to sponsor schemes is weakening dangerously, the Pensions Management Institute warns.
In its response to the Pickering-led simplification review, the institute said that any simplification must be radical to avoid employers incurring massive costs in adapting their systems with very little result.
PMI vice-president Tony Ashmore – who wrote the institute’s response to Pickering’s consultation paper – said: “Another layer of expense for very little reward may result in employers terminating existing arrangements and/or becoming unwilling to sponsor schemes in the future.
Simplification must achieve a balance and lead to clarity to make employers remain, or become, willing sponsors in the future.”
The warning bells echo the fears of many government critics who believe that only minor tinkers to existing laws will result from the review, adding to the legislative burden faced by the industry.
Pensions minister Ian McCartney has rejected such claims and argued that the purpose of the Pickering review is to clear out much of the useless regulation which such critics have highlighted.
Speaking in the Commons, McCartney said: “We must strip out all the regulations that are doing nothing to support and develop pension schemes, to protect members’ interests or to help and encourage companies to continue to fund them.”
McCartney added that the consequence of ineffective legislation would be for companies to chose not to offer final salary schemes. “We cannot force companies to have defined benefit schemes and it is therefore important that the regulatory regime should meet the balance of requirements of the schemes that are established.”
By Jonathan Stapleton
This week's edition of Professional Pensions is out now.
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