Two out of five contributors think none of the Department for Work and Pensions' preferred options for defined benefit-lite will find favour with employers. Among those who thought some of the ideas might be taken up, the majority thought cash balance or core DB schemes with fluctuating additional benefits could prove successful.
Many contributors thought employers' fingers had been burnt too many times before when taking on risk to contemplate giving any guarantees on benefits. One said any proposal labelled as ‘DB' would have finance directors "running for the hills".
"I don't think that employers will ever again be persuaded that the uncertainty of any DB-style option is worth taking on," said one correspondent.
Another commentator said: "Life has moved on from the paternalism of DB. We may hope to see better quality defined contribution in the future, but it will undoubtedly be DC with heavy emphasis on personal ownership."
Some contributors were disappointed by the lack of imagination shown by the DWP. One respondent said: "They are all rather limited suggestions and rather disappointing for what could have been DA creativity and innovation."
But more than a quarter of contributors backed the cash balance option, which was described as the easiest to implement and communicate to staff. It was also identified as the option which gave the employer the most control over risk.
"Many employers still favour a ‘paternalistic' approach and want to offer DB, yet the mortality risk keeps worsening," said one respondent.
Another commentator added: "If inflation is hedged (revaluation) then the only real risk is pre-retirement investment risk."
Slightly fewer contributors backed the ‘core DB' option, although a number of people pointed out that many employers with pre-1997 experience would be familiar with the model.
"This doesn't need any change in the legislation," said one respondent. "I know at least one scheme that had just such a structure in the 1970s."
Giving schemes a mechanism to increase normal retirement age was supported by just one in ten participants, but several contributors pointed out that the full range of options could be needed.
"Any solution proposed for the pension industry must be flexible and tailored to the needs of the sponsor," said one contributor. "Therefore the most likely to appeal to employers is ‘all of the above'."
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