Talking head: Pensions minister Steve Webb says the government is "deliberately not being too prescriptive" about collective pension schemes, as it expects the industry to develop suitable benefits structures.
The bill will include the measures to deliver the guidance guarantee which we have promised will be in place by next April to equip people to benefit from the new Budget freedoms. But it also includes a new legal framework for the future of workplace pension schemes.
Simply put, the defined ambition concept which lies at the heart of this bill is a radical reshaping of pensions legislation to ensure it remains relevant for future generations.
We have very deliberately focused on the member’s experience of what their scheme offers
The current system has for too long polarised defined contribution and defined benefit schemes, forcing either the individual consumer or the employer to take on the full financial risk of pension saving. There’s a clear appetite to move away from that.
Our bill responds to this by introducing three categories of pension scheme based on the type of retirement benefit promise they provide to savers. It also makes provision for collective benefits to operate in the UK, as they do successfully in other countries.
In devising the new definitions, we have very deliberately focused on the member’s experience of what their scheme offers. The bill will also apply and refocus existing legislation in relation to the new terms.
Consumer trust in the pensions industry is low. As a government, we can protect people against the risk of high charges or poor governance – as indeed we are doing – but our research has shown time and again that, beyond that, people also want more stability and certainty.
We are deliberately not being too prescriptive about exactly what shared risk or collective pension schemes will look like. These specifics will rest with the pensions market to develop and innovate.
If a pension scheme doesn’t slot neatly into one category, regulations will ensure it can be treated as two or more separate schemes.
Although there has been a lot of pension legislation in this parliament, including two bills in this final session, we need to put in place a legislative framework so providers can innovate and employers can see what new options will be available to them, particularly as contracting out comes to an end.
We look forward to working with the pensions industry on the details of these reforms, as this is essentially a framework bill.
After decades of decline in DB provision and with the pendulum swinging inexorably towards individual DC, this new framework will help to ensure employers can offer the kind of risk-sharing scheme members have told us they want to see.
Steve Webb is the UK pensions minister
