Pensions minister Ros Altmann sets out her stall on driving forward pension reform, paying particular attention to DB funding.
I want to make sure the reforms already under way achieve the aim of helping to provide better later-life incomes for millions of British people.
The past five years saw unprecedented change in so many critical aspects of the pensions landscape. The next five years represent an opportunity to consolidate and build upon that ambitious programme. But the stakes are just as high and the challenges just as great.
My role is wide-ranging, but my overarching aim is very simple: to make sure those affected by our reforms understand them and engage with them.
It is easy to associate DB with the past. But with more than 12m members and more than £1tn invested, DB schemes will play a significant role in retirement incomes for decades to come
And if there is one key ambition driving what I do, it is that as many people as possible recognise the benefits of improving their later life income prospects, whether that means planning to save more, working longer or a combination of the two.
The government and the pensions industry must work together to renew our focus on people – those who truly gain from a strong and healthy pensions industry.
DB funding
One area that is going to require particular attention in the near future is the funding of defined benefit schemes.
It is easy to associate DB with the past. But with more than 12m members and more than £1tn invested, DB schemes will play a significant role in retirement incomes for decades to come.
The Pensions Regulator’s flexible approach allows employers breathing space to grow their businesses sustainably while also strengthening the security of their pension schemes over the longer term.
It expects to see funding solutions that are appropriate to schemes so members can be paid the pensions promised.
There is no single ‘right’ way to optimise pension investment performance and risks.
Indeed, there could be systemic danger if every scheme tries to follow exactly the same route.
But schemes could consider a more innovative approach when it comes to investments. For example, they could diversify assets to invest more widely than simply in equities and bonds, while making use of efficient liability-hedging techniques.
Of course, trustees must ensure they understand – and can manage through their scenario planning – any risks being taken.
As the pensions landscape continues to evolve, I want to ensure the working relationship between government and the industry continues to improve.
Ultimately it will be through working together that we can better provide those ready to retire with the security and independence to plan for their future.
Ros Altmann is the UK pensions minister
