Webb: defined ambition indexation under review

Webb told PW he would be prepared to remove current laws discouraging risk sharing between pension schemes and their members, as well as implementing new rules.

He has pledged to “reinvigorate occupational pensions” through the new policy, by giving employees greater certainty about their pension outcomes.

He said: “We need to make sure pensions are really meeting people’s needs. And it’s never too late to do that – we’re approaching 10 million people to join pensions over the next six years.

“To some extent you can already share risk – for example, defined benefit life expectancy risk can be shared with members, and defined contribution plus has that extra guarantee.”

And on the issue of small pots, he revealed he now favours the pot-follows-member approach over the aggregator model, after being swayed by “compelling” Association of British Insurers research showing the limitation on pot size makes consolidation harder in the latter option.

He described the aggregator model as “a giant gobbling up of pots”, which he argues would make the market more imbalanced.

Webb said the reason the decision has taken so long to reach is because he’s making decisions against the backdrop of a multi-billion-pound industry.

He also denied the small pots legislation had ever been delayed adding: “At the end of this parliament, people will say ‘wow, look at everything they got done’.”

PW previously reported more than half the pensions industry want small-pot transfers to change so “the pot follows the purse”, according to a poll of defined contribution managers.

DCisions research shows there is around £18.5bn in small, inactive DC pots in the UK.

Its analysis of 600,000 members of workplace schemes shows around 350,000 pots have been inactive since 2008.

These pots have an average size of £5,276, which is too small to provide an adequate retirement income.

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