Index linked Widows Pensions could be scraped #UKPensionsNews #ReasonforQROPS #IN
11 Monday Nov 2013
The problem is that traditional final salary schemes – known as defined benefit – are ultra-expensive for employers, leading to the majority being shut down. There are now just 1.7m people left in private-sector schemes, compared with 5m 20 years ago. Just 841 final salary schemes remain open.
“If we do nothing, defined benefit schemes will all be shut down,” Mr Webb told The Independent before outlining a range of proposals that he intends to push through during the lifetime of the existing Parliament.
The proposals revolve around a new category of pensions that would be linked to salary to give employees some certainty about how much they will retire on. However, crucially they would be cheaper to run than traditional schemes for employers.
His hope is that what he termed “larger firms that take pensions seriously” will adopt the new schemes, rather than move all workers to the now much more popular defined contribution schemes, which are simply linked to how much you save into your pension rather than what you earn.
However, to make the new schemes simpler means scrapping widows’ and widowers’ rights to any pension payouts as well as getting rid of indexation, under which payouts rise in line with inflation.
That has led to huge protests. Spokesman from Hargreaves Lansdown warned: “Workers could save diligently throughout their lifetime, only for the rug to be pulled from under them at the last minute.
“Flexible defined benefit schemes will be complicated and costly, and will create huge uncertainty for pension savers about what pension income they can expect.”
Meanwhile, experts say firms won’t be persuaded to sign up to the new schemes. “Employers have invested heavily in defined contribution in recent years and are unlikely to return to defined benefit unless they are compelled to do so,” said an employee of Hymans Robertson.
“Our proposals are designed to reinvigorate workplace pensions, providing people with more certainty about what they will get in retirement,” Mr Webb said.
“I want people to have the best pensions possible, where risks are shared between employers and their workers.”
Expats Pensions Comments:
If indexation is scraped this will have a huge affect on your pension. Moving your pension overseas can bring the growth potential back in your control. We specialise in helping clients evaluate the possibility of transferring their personal or company pension with them overseas. For help securing your future overseas and building or transferring a Pension abroad please visit our website www.expatspensions.com