The Private Pensions Bill will allow workers to join new collective defined contribution schemes, pooling risks between members to give them greater certainty about their retirement income.
Mark Stopard, Head of Product Development at Partnership, said:
“Over the last few years, the UK pensions market has undergone arguably some of the biggest changes in its history – with today’s announcement adding further diversity to the mix. This move is to be welcomed as it demonstrates further innovation and a genuine commitment to providing better consumer outcomes.
“However, we need to ensure that rather than simply copying the Dutch model, we recognise the UK market poses different challenges and consider how we can learn from their mistakes. One possible solution is to look at ways in which we can adapt the CDC model by using areas of expertise where the UK is arguably a world leader such as individual underwriting of longevity risk that underpins the current enhanced annuity products.
“As usual, the devil will be in the detail and we await further information as to how these product might operate in the UK market.”
Jamie Jenkins, Standard Life Head of Workplace Strategy, said:
“We warmly welcomed the increased flexibility and choice for savings introduced in the Budget, however we believe the Government could go further. The three recommendations we are outlining today would further simplify the savings landscape while increasing the flexibility on offer to savers. We are calling on the Government to review and consider all of our proposals.”
Dominic Grinstead, Managing Director, MetLife UK commented:
“The Government’s drive on pension reform is already proving popular with MetLife’s research showing 24% of working adults plan to start or increase pension saving as a result of the Budget plans to give people greater control and flexibility over their retirement savings.
"The three elements of reform, which focus on the flat rate pension, auto-enrolment and creating freedom in retirement income planning, are all welcome to effectively deal with the new reality of people living longer. This will encourage people to save and create an environment of responsibility towards saving for retirement.
“It is crucial that the momentum created by the Budget is maintained. The goal of the new CDC schemes must be to reinforce the pensions savings culture in the workplace by establishing a fair, flexible and straightforward means of saving for a comfortable retirement. If this opportunity is missed it will damage saver confidence in the new pensions regime.
“As a leading innovator we believe guarantees will play a major role in delivering flexibility and certainty but there remains a need for more new thinking, particularly ahead of new rules in April next year.”
Dean Mirfin, group director at Key Retirement Solutions, commented:
“The Government drive for pension reform is shaking up the entire retirement saving market and underlining how savers need to take control of all their assets before making a decision on retirement income. It is particularly important for the over-55s who will be the first to feel the effects of the changes.
“The risk of so-called CDCs is that people have to surrender flexibility and freedom. It is true that the principle of wider pooling holds a lot of merit but in practice in a world of pension freedom and flexibility, shouldn’t people be in control of their own fund? Collective pooling does allow savers to collectively take risks in order to potentially benefit from higher gains but it does not necessarily guarantee a better outcome.
“The choice of whether to enter into a collective pooling pension really depends on the individual and what they are trying to achieve. People who want to manage their investments with a more aggressive approach to risk may find they suffer under this type of structure.
“That is why it is vital that the new legislation planned on access to advice and taking income is crucial in ensuring the momentum of the pension revolution is maintained.”
