Commenting on Steve Webb’s new ‘defined ambition’ pension scheme proposal, Emma Watkins, Director of Business Development at MetLife Assurance Limited stated: “We welcome Steve Webb’s initiative to open the defined benefit (DB) versus defined contribution (DC) pension scheme debate through the proposal of a ‘defined ambition’ pension scheme. There is no doubt that workplace pensions need reinvigorating and this initiative represents a step in the right direction.
“Our research shows that employees value pensions. Over half (54%) ranked it in the top two of employment benefits alongside holiday entitlement. And yet over a third (38%) are concerned that they may not have enough pension income in retirement. There clearly is a need to provide individuals with a greater sense of what pension they will receive to assist in their retirement planning.
“Defined ambition pension schemes may be a way for an employer to provide something greater than a DC scheme without taking on all of the volatility and perceived risk of a DB scheme. The recent closure of the last remaining open DB pension scheme of the FTSE100 represents a milestone and acts as a timely reminder that more creative thinking is needed within the occupational pensions industry and by policymakers.
“There is clearly still a lot of detail to be determined. In addition to looking at models in other countries, we need to ask employees and employers what they want from their workplace pension and design a system that is financially sustainable yet sufficient to allow individuals to retire in dignity. Whether finance directors’ memories are sufficiently short to risk the possibility of an ‘ambition’ subsequently turning in to a ‘cast iron guarantee’ remains to be seen.”
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