A ‘low level’ of defined benefit (DB) pension provision may make a return to UK workplace pension saving, actuary James Smith has predicted.

Speaking in a personal capacity at the Association of Consulting Actuaries’ (ACA) inaugural Bloomfield Bow Tie Lecture, in honour of former chair, Patrick Bloomfield’s untimely passing last year, Hymans Robertson client director, Smith, stated: “Just because DB didn't maybe work as well as we would have liked it to the first time around, that doesn't mean that it was a bad idea."

Highlighting the need for a low level of DB provision to provide income certainty for savers, in contrast to the income uncertainty provided by many other pension products, he added: “I know everybody's spooked by DB; scary concept, balance sheets, etc. I think we are paving a way to being able to bring back DB in some kind of meaningful form, at a very low level. And I don't think it's something that we should really shy too much away from."

Smith also jested that “I know that we're scarred in this room, but, news flash, the finance directors of tomorrow didn't go through this hell. We'll be able to sell it again".

"We'll have re-elected DB, and we'll have learned lessons from last time. So, DB can work at a thin level, managed appropriately. And we've learned the lessons. We know what our rip cords are now. So, I think it could be a nice little solution," he added.

Describing this as ‘defined minimum benefit’, or ‘DMB’, fellow speaker, Legal & General Investment Management (LGIM) senior DC fund manager, and actuary, Alexandra Miles, speaking in a personal capacity, stated that it would be “hugely helpful for people trying to work out the differences between all the different options they've got available to them”.

Highlighting the low opt out rates of auto-enrolment, she added: “Why don't we make that final stage, make it compulsory at a level that is achievable for the people paying in and then they're into something like a DMB, which makes sure that they have a secure level of income.

"They can then have responsibility for topping up and financial mobility on top of that.”

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