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MPs and trade bodies back Webb’s defined ambition plans

MPs and trade bodies back Webb’s defined ambition plans

MPs and trade bodies have backed pensions minister Steve Webb’s proposals for hybrid workplace schemes, which sit halfway between defined benefit (DB) and defined contribution (DC) models.

In November 2012, the Department for Work and Pensions (DWP) unveiled plans for a defined ambition (DA) pension scheme, designed to share risk and costs between employers and employees.

DB schemes are rapidly being closed to new members as they have become too costly for most employers, with many struggling under spiralling pension fund liabilities; while DC schemes have been criticised for putting too much investment risk on the individual member.

Webb (pictured) proposed two visions for DA schemes.

The first was a ‘slim-lined DB model’, which could offer a core, but lower, guarantee with additional benefits conditional on investment performance.

The second approached DA from a DC starting point, but with added guarantees.

Speaking at the Westminster Employment Forum auto-enrolment conference, shadow pensions minister Gregg McClymont said strengthening DC schemes would be easier.

‘The horse might have bolted when it comes to DB, so moderating both sides into a compromise would be hard,’ he said.

‘Maybe a better solution therefore would be to add an unknown quantity to DC.’

James Walsh, National Association of Pension Funds senior policy adviser, said: ‘At the DB end of the scale, we need some risk sharing.’

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