Webb reveals plans for ‘defined aspiration’ pensions

Pensions minister Steve Webb has revealed the government will consult this year on how to create a “third option” for pensions beyond defined benefit (DB) and defined contribution (DC) structures.

Webb, speaking at the National Association of Pension Funds (NAPF) chairman's dinner yesterday, said the consultation will explore how workplace pension structures can be "reinvigorated" to improve pensioner incomes.

The announcement comes after the Pensions Regulator (TPR) produced in December a six-point plan for improving DC pensions.

There have also been calls for the government to cap charges levied on DC pensions used for auto-enrolment to protect the savings of members.

"As more and more final salary pension schemes close their doors, we need to have a frank and open debate about how to get companies to continue to offer good quality pensions," Webb said according to the Telegraph.

Webb said a third option between DC and DB, dubbed "defined aspiration", would give scheme members a degree of security but, would also allow employers the flexibility they need to cope if stock markets crash and scheme liabilities rocket.

"We have an absurd situation, where if an employer attempts to offer more certainty, it is immediately classed as DB and then subject to myriad regulations and restrictions," said Webb.

"Employers are increasingly giving up in the face of these obligations. They should not be forced to take on a burden that could put their business at risk over the longer term.

"We will be consulting later this year on reinvigorating private pensions, and I look forward to the debate and the ideas that come forward."

According to the latest figures from Mercer, liabilities in DB pension schemes belonging to FTSE350 companies stood at £83bn over January, compared to £64bn in December 2010.