Speaking at the annual lunch of the All-Party Parliamentary Group on Occupational Pensions, ACA Chairman, Stuart Southall has urged the Government to think again about how it approaches any attempt to equalise Guaranteed Minimum Pensions (GMPs).
Addressing the Pensions Minister, Steve Webb MP, direct, who was the principal guest at the lunch, Stuart Southall said:
"Aside from one isolated case, I have never known any beneficiary query the possible inequality of GMPs and nor does it seem there is any legal consensus that equality is required by law or even achievable if it is.
"If Government feels it has to press ahead with an initiative which could cost industry £10 billion plus a significant implementation bill then would it not be best to do so with as much legal certainty as possible? The Association's view, echoed by those of other pension bodies, is that this can only be achieved by an ECJ test case.
"In the absence of such a test case hard-pressed employers might be spending money they never needed to spend; or worse they might spend considerable sums now, only to find in years to come that they got it all wrong in European law and must spend even more. Much as the ACA's members might benefit from all this extra work, I doubt this is an exercise any of us would derive any pleasure from nor indeed get any thanks for."
Stuart Southall then summarised his views on the current state of play of pension policy:
"The ACA commends the Minister on the handling of the roll out of auto-enrolment and NEST and warmly welcomes his April paper on State pensions for the 21st century. Albeit with a considerable gestation period, these changes could both become valuable building blocks as we all seek an environment in which a reasonable standard of living can be achieved for, and on behalf of, the UK's future pensioners.
"However, in the private sector, where the Coalition has undertaken to ‘simplify the rules and regulations ....... to help reinvigorate occupational pensions, most steps by sponsors have been backward. Indeed the retreat from defined benefit pension provision seems to echo Dunkirk in its speed and proportions; is there to be total obliteration or might we - with Government help - in some way engineer a miraculous escape and a later turning of the tide?
"We are encouraged by the cash balance reforms in the current Pensions Bill but of themselves these will not stem what the ACA's practitioners see and our surveys show to be trends away from sponsor risk-taking and a growing levelling-down in response to the coming auto-enrolment obligations.
"Our clients need genuine de-regulation and much greater freedom of design if they are to offer private sector employees anything involving a sharing of risk.
"A world of pure defined contribution provision may be quite acceptable for the better off but, even with the NEST and new State pension building blocks, it is likely to be unfit for purpose for many middle and low earners. And worse, should we see a private sector marketplace where DC is the invariable model then the private/public sector pensions divide will still be too wide even after the changes which might flow from the excellent work of Lord Hutton."
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