The Confederation of British Industry (CBI) has labelled a new government Green Paper on defined benefit pension schemes a ‘sensible start to a complex conversation’.
The Green Paper, published this week, is intended to look at the security and sustainability of defined benefit pension schemes – also known as ‘final salary’ schemes.
Currently, around 11 million people in the UK rely on a defined benefit scheme for all or part of their retirement income and defined benefit pensions hold around £1.5 trillion of assets.
However, increased life expectancy and changes to working patterns have raised doubts about their long-term viability. The Green Paper aims to be a ‘wide ranging call for evidence from employers, the pensions industry and consumers’ about the current state and future direction of defined benefit pensions.
Member protection, funding and investment, scheme affordability and consolidation will be reviewed as part of the consultation, and the government will also consider strengthened powers for the Pensions Regulator.
Neil Carberry, Director of People and Skills at the CBI, said: ‘The Green Paper is a sensible start to what is a complex conversation about how we both boost growth and honour pensions promises.
‘Firms will welcome proposals to offer schemes greater flexibility, as well as proportionate changes to the powers of the Pensions Regulator, as businesses carry the bulk of the costs of failure through the PPF levy.
‘Actions like moving to the official measure of inflation for indexation (CPI) and encouraging different ways to accurately and appropriately measure the funding position of schemes could provide real support to businesses.’
The Green Paper can be viewed here: www.gov.uk/government/consultations/defined-benefit-pension-schemes-security-and-sustainability.