The Association of Consulting Actuaries has called on the government to act within the year following its announcement yesterday, which said it would continue to review Limited Price Indexation (LPI) of pensions for future accrual.

ACA chairman Andrew Vaughan argued indexation must be made optional from 2016, when the end of contracting out and implementation of the single-tier pension will see sponsors of defined benefit schemes currently contracted-out and open to future accrual forced to review and revise their schemes.

Without sign of reform and progress towards risk sharing, employers were likely to use the opportunity to abandon DB pensions, warned the ACA.

“Optional LPI would allow sponsors of defined benefit schemes some breathing space ahead of what certainly I hope will be a raft of new pension options and flexibilities that will emerge from the ‘defined ambition’ project,” Vaughan said.

Reforms to implement the government’s plans for defined ambition schemes, which will attempt to find middle ground between the certainties (and costs) of DB, and defined contribution schemes in which members take all the investment risk, would take time, Vaughan added.

“I know the recent report of the Work & Pensions Select Committee hopes these reforms and easements will be ready by 2016; that may be optimistic for some of the new options.”

He stressed, however, that the changes he proposed would not affect accrued rights, and would be optional.

He concluded: “In essence, the move would help employers to have more flexibility over the cost of providing defined benefit pensions ensuring more members continue to receive the greater certainty of pension that undoubtedly they wish to retain.”

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