ACA looks to simplify pension benefits system

The Association of Consulting Actuaries (ACA) has proposed an industry-wide ‘model scheme’ to act as a guideline for schemes to simplify their pension benefits.

It is working with scheme sponsors and trustees to encourage its adoption and has seen “a lot of support” from industry members.

Speaking at the ACA annual chair’s dinner, ACA chair Jenny Condron said that the industry needs to be “bold” in helping others understand the impact that GMP conversion could have on the “delivery of simpler DB pensions”.

She continued: “It’s an enormous challenge. And it won’t be a quick one. But with resulting lower ongoing costs, improved benefit security and clarity for members on the pensions they can expect, we must try.”

Condron also noted that more needs to be done to simplify pensions taxation.

“We are operating in an environment where few of us can simply explain how the pensions tax system will impact any individual, now or at retirement,” she said.

“Everyone expects to pay tax to support valued public services, but it is essential that the system is transparent for it to be considered fair, and change is long overdue. We stand ready to assist government in simplifying the regime.”

Benefit security was the “third priority area” where the ACA believe that more can be done to help members have a better pension experience.

The new funding code was cited as a good first step, but it was also noted that the industry as a whole must try and ensure that it makes a material difference to benefit security and that schemes must not be burdened with higher costs and lengthier negotiations.

Condron concluded: “There is an underlying theme to each of the points I have made – simplicity.

“Unless we strive for this, we risk undermining still further consumer confidence that as an industry we are focussed on achieving better member outcomes, rather than our own job protection.

“It is our collective responsibility to make sure that members understand the promises they have – and have not - been made.

“They need to know how they will be taxed as they build up and bring their benefits into payment, and believe that, as an industry, we will help ensure there is adequate security to provide those pensions long after we ourselves have retired.

“After all, isn’t that what we expect for our own pension?”

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