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UK - New Collective Pensions

UK - New Collective Pensions

 
Old Jun 1st 2014, 7:23 am
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Default UK - New Collective Pensions

Plans to allow workers to contribute to Dutch-style collective pensions are to be unveiled by the government.

The move is expected to feature in a Pensions Bill to be announced in the Queen's Speech on Wednesday.

Supporters argue the shared funds are a good investment as they are less vulnerable to stock market variations than individual workplace pensions.

Ministers say the move will give people "better value", but critics argue the returns are not certain.

Under the changes, which could be introduced by 2016, workers would be able to pay into funds shared with potentially thousands of other members.

BBC political correspondent Ross Hawkins said there was "a growing political consensus behind the idea".
The Netherlands

Pensions minister Steve Webb told The Sunday Telegraph that the key advantage was "pooling risk" of investments performing worse than expected across large numbers of people of different ages.

"It gives people greater certainty and probably better value," he said.

"There are some quite strong claims made for how much better it is. People say you will get a 30% bigger pension.

"You might, you might not, but clearly it is pretty unambiguous that you will get a more certain outcome and potentially a better one."

But critics of the model have warned that, unlike a fixed annuity, pensioners only have a target for what they will receive in retirement - rather than a guarantee.

If the collective fund's investments fail to generate the predicted profits, pensioners could see their incomes fall in some cases.

The plan is based on schemes which are already operating in the Netherlands and Scandinavia.

However, Dutch politicians have recently called for collective pensions to be scrapped in favour of British-style individual pensions.

The Queen's Speech will set out the government's final legislative programme before the 2015 general election.

The government has already revealed plans to overhaul the pensions system, with Chancellor George Osborne pledging in his March Budget to give people more control over the way they use their pensions.

Source: http://www.bbc.com/news/uk-27653861
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