Commenting on the publication of the Government's reinvigorating workplace pensions paper, Peter McDonald, chief actuary at PwC, said:
“The government has to be applauded for trying to tackle the challenge of how to get more people to save towards their retirement. The proposals hold a lot of merit, but the sticking point will be whether companies have the appetite to provide these types of pensions. Constant tinkering with the pension rules has left employers disillusioned and there is little appetite to take on any more risk than they need to.
“What workers and employers most need is a simple, stable pensions regime so that they can plan for the long term. People with defined contribution (DC) pensions are currently very much at the mercy of the stock markets, with little guarantee of what their final pension will be. Much improved visibility and clarity on how a DC fund is performing over a worker's lifetime could significantly help with matching people’s savings and expectations.
“The proposal to create a middle ground between defined benefit and defined contribution pensions is a great idea if it can work. The challenge will be persuading employers to move back towards an arrangement where they are tied into a pension promise, as so many have swung away from offering DB schemes.
“The idea of limiting employer’s DB promises to only when the worker is still at the company, could lead to unintended consequences. For example, workers are likely to think twice before leaving a job that offers a DB scheme and this could create an unwelcome staff backlog for many companies.”
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