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Barings proposes fully-funded occupational pension scheme

Baring Asset Management has called on the Government to introduce a fully-funded occupational pensions system in the UK to be managed along the lines of the Dutch civil servants fully-funded scheme ABP.

Barings director of fixed income Toby Nangle believes Gordon Brown has the opportunity to move public occupational pensions schemes to a fully-funded basis when the Whole Government Accounts project comes to fruition later this year.

Nangle has produced a white paper called Solving the UK’s Pension Problem to show how the UK government could reduce the cost of pension provision to the public and remove the UK yield curve distortion.

Nangle says that over £600bn of unfunded public sector occupational pensions deficits will effectively be brought on-balance sheet later this year as part of the move towards Whole Government Accounts.

Nangle says: “Gordon Brown showed great foresight in setting the Whole Government Accounts project in motion back in 1998. As this project comes to fruition, the likely Brown government has an historic opportunity to move the public occupational pensions system to a fully-funded basis.”

“This move could also remove the UK yield curve distortion, providing relief to the private sector, and potentially enabling them to halt the tide of defined benefit scheme closures.”

He identifies four main benefits of such a move including an increase in annuity rates for retirees to boost the income of pensioners and a reduction in the cost of public sector occupational pension provision.

Nangle adds: “At present only Local Authorities and the Members of Parliament benefit from fully-funded pension schemes. Rolling this out across the public sector would be a bold move of similar magnitude to the granting of independence to the Bank of England ten years ago.”

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