By Matt Ritchie
Defined benefit provision is not going to make a comeback, and the pensions debate in the UK needs to be firmly focused on defined contribution, according to Lord Hutton.
Hutton, whose review laid the foundations for the public sector pension reforms currently underway, today told a local authority pension seminar that a focus on outcomes rather than structures was required in DC reform.
The government’s focus on improving performance and regulation of DC schemes was welcome.
“Here too we need the market to innovate, to focus more on outcomes rather than simply trying to manage investment volatility, and so give people the chance to aim for a given level of retirement income. This is where the market needs to move to.”
Further, Lord Hutton said it was important to avoid putting in place well-intentioned legislation that had adverse unintended consequences, citing mooted solvency capital requirements for DB schemes and statutory minimum returns on DC plans as examples.
“By all means, let us study alternative systems around the world. But let us keep this important debate focused on the central issue in front of us - how do we help the next generation of employees build up an inflation proofed retirement income that will stretch to cover the many extra years we are all living?” Hutton said.