The chairman of the Association of Consulting Actuaries is voicing strong recommendation for pension risk sharing schemes in the face of concerns over UK pensions.
Ian Farr highlights risk sharing schemes as a key means of encouraging pensions, maintaining that the government should do more to support such programmes in the future and calling for the development of a "politically non-controversial" risk sharing plan.
He claims that for lower paid workers, the replacement of final salary schemes with money purchase schemes could be unfeasible.
"For many, money purchase arrangements will mean either high volatility in returns or low returns, depending on the risk individuals are prepared to take … The volatility of money purchase pensions for those on lower incomes can be very worrying."
Mr Farr argues that risk sharing schemes offer a workable alternative, lifting the burden that can be imposed by final salary schemes.
"I believe there is serious interest in a new regime for risk sharing schemes," he states, adding, "Such a regime could also help to ease the growing polarisation between private and public sector pensions."
A new report from the Association of British Insurers suggests that many UK workers are failing to adequately save for retirement, whilst a large percentage of employers lack faith in government plans over the introduction of personal accounts.
Risk sharing schemes for pensions could be beneficial, says Farr
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Risk sharing schemes for pensions could be beneficial, says Farr
Thu, 23 Nov 2006
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