The Government must adopt policies that relax legislative restrictions on pension scheme design, says Mercer, as simple reliance on any one design, such as a collective defined contribution (DC) scheme, would be inadequate at encouraging employers to provide retirement provision.

Such plans would also, Mercer said, be inadequate to encourage employees to value occupational retirement provision.

The financial consultant supports the ending of regulatory restrictions on hybrid or risk sharing schemes as one element in improving the retirement income of the UK's workforce, and helping to spread the risk of pension provision between employer and employee.

It believes that earlier statements made by, Theresa May MP, as Shadow Secretary of State for Work and Pensions, which show support for hybrid schemes are reasons to feel that ministers may look seriously at 'halfway house' plans.

However, Dr Deborah Cooper, head of Mercer's regulatory group, said that it was too early to be optimistic that what politicians say in opposition is translated into action when they find themselves in power.

"The current state of affairs is bipolar, with the majority of the risk either in the employer's or the employee's hands, and this could be mitigated by risk-sharing schemes," she said. "While we are pleased to see Conservatives recognise the problem, it's not yet clear whether the coalition government will go as far as addressing it."

The government should therefore, Mercer said, make it easier for employers that provide DB schemes to reduce or avoid increased costs during times of economic downturn. It should also be easier for DC schemes to provide underpins to reduce the effects that extreme market volatility could have on members.

Collective DC schemes, Mercer believes, are not the panacea to smoothing the effects of market volatility b y enabling members to benefit from higher investment returns than traditional DC lifestyle funds that they appear to be.

"Currently, the fashion for individual ownership, control and responsibility for pension saving militates against collective DC. This is because, in order to protect members from falls in fund values, collective DC requires members to give up control over investment choices and some of the 'upside' investment performance achieved. Whilst some people will be happy with the trade off, others will believe they are losing out," Cooper added.

A stable environment is necessary to a collective DC scheme for its long-term success, Mercer said. Even if strong governance and effective communication to members is present, the rules for sharing 'profit' are likely to break down should a membership profile or investment market sentiment alter.

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