The Department of Work and Pensions (DWP) should include greater flexibility for private sector defined benefit (DB) schemes in managing the current and future surpluses in the next Pensions Bill, the Association of Consulting Actuaries (ACA) has stated.

In his speech at the ACA annual industry dinner, ACA chair, Stewart Hastie, said that he hopes that the decision to make the new Pensions Minister also a Treasury Minister will help this.

He argued that while the universe of DB schemes was now generally well-funded and, in many cases, materially de-risked, there is an opportunity to help make future savings more adequate, more equitable and more sustainable.

“We are at something of an inflection point, where protecting past DB pension promises is no longer the daunting issue it once was,” Hastie said.

“With appropriate safeguards, enabling and incentivising DB schemes to run on and deliver a sustainable stream of future surplus assets can help employers increase investment in their businesses and pension savings for future workers. 

“Getting this right can also help to bring longer-term stability to gilts markets and provide additional tax revenues in the near term.”

Additionally, Hastie said he hoped that policymakers would address potential headwinds that could undermine better retirement outcomes, calling it “just as important” as greater flexibility for private sector DB schemes managing the current and future surpluses.

“Many of us are concerned about the adverse implications of the Virgin Media case – think of the pain of guaranteed minimum pension equalisation, but on steroids,” he continued.

Hastie highlighted that with the Chancellor’s first Budget next month, there has been “growing concern” that pensions tax relief will be impacted, stating that along with others ACA has made representations to the Treasury.

“Our principal call – as it has been for several years – is that, ‘yes’, we recognise government is entitled to review pension tax measures in the context of the country’s finances but, and it is a big but, this must be done cognisant of the consequences and challenges and with proper consultation of industry,” he said.

“This includes the key challenge of ensuring the media narrative doesn’t run away with them on this, saver confidence can be as easily undermined by perceptions, as much as the policy changes themselves.

“It would be an ‘own goal’ for tax changes to worsen the savings adequacy challenge that current and future generations already face, and that second stage of the forthcoming pensions review is seeking to address.”

Hastie also said that he hopes that the new government will proactively support and enable various innovations, like multi-employer collective DC and sidecar savings, which the pensions industry would like to see support a better savings environment and better outcomes for all. 

“So, I think the government has a real opportunity to deliver meaningful change - adequately meeting both private and public pension aspirations, and outcomes for present and future generations,” he concluded.

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