The future success of the pensions market requires a move to collective deﬁned contribution (DC) schemes, according to David Pitt-Watson, author of Building the consensus for a people’s pension in Britain, during a session at the during a session at the Employee Benefits Pensions and Workplace Savings Summit.
Collective pension plans in the UK are deﬁned beneﬁt (DB) schemes. Collective DC plans enable staff at different employers to pool savings into one pot, from which the pension is paid. This is commonly used in the Netherlands.
“Collective pensions give better, higher pensions for the same cost,” said Pitt-Watson. “They internalise and share on the liabilities side, so staff are not forced to buy an annuity. That means the pot’s investment does not have to be hugely cautious, as it does when people are investing individually.”
In its November 2012 paper Reinvigorating workplace pensions, the government launched a consultation on whether this pensions structure should be available in the UK in the form of a smaller number of larger-scale, multi-employer plans.
However, the Association of Consulting Actuaries’ Smaller ﬁrms’ pension survey, published in February, found that 67% of small employers that responded to the survey do not want to see multi-employer DC schemes.