Lee Hollingworth, Head of Defined Contribution at Hymans Robertson said:
“The emphasis is noble – reducing risk and delivering better outcomes for pension savers. The reality is this could create distinct winners and losers. Potential losers include younger savers and the less well-off. On both cases a sustained period of low investment returns would mean these groups subsidising current and better-off retirees who are likely to live longer.
“The muted reaction of employers is based in part on the Netherlands’ experience. There, employers have found themselves paying in extra money rather than face the industrial relations impact of benefits being reduced. Naturally, UK employers will be wary of this potential liability.
“It’s not all bad news though – sharing risk means lower operating costs and access to different types of assets that savers can invest in. Infrastructure and other previously out-of-reach investments can boost diversification, lower risk and provide more stable returns. Ultimately, the future of defined ambition may be determined by how well its collectivism can be squared with the individualist approach granted by the Chancellor in March’s Budget.”
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