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DB facing the final blow in rebate freeze

The Turner report’s proposal to freeze contracting-out rebate levels is the final nail in the defined-benefit coffin, says Standard Life head of pension policy John Lawson.

The schemes would be hit by lower Government subsidies because contracting-out rebates would no longer increase in line with earnings, effectively phasing them out over time.

DB schemes have already been saddled with the costs of the Pension Protection Fund, which Lawson estimates at 600m a year, and he says any fall in rebates would be the final straw for many schemes.

Turner held fire on recommending the outright abolition of the rebates.

But Lawson fears there is a danger that the double whammy of frozen rebates and the PPF requirement will lead to further DB scheme closures while those that survive are likely to fall foul of the need for the employer to match contribution levels with those offered by the proposed National Pension Savings Scheme.

Lawson says: “We could see 1.3bn in rebates taken out of DB schemes, assuming 250m in the first year.

“This could be the straw that breaks the camel’s back and we could end up with even less going into private pension savings as a result of Turner.”

Smith & Williamson director Mike Fosberry says: “I think it is almost certain that DB schemes will be reduced. Turner said so in the report. It is not quite the death of DB but it is a terminal situation.

“Offering access to the national pension scheme would make it easier for employers to say they are doing something for employees across the country.

“It is also an interesting point that the report says employers do not believe that pension schemes are an incentive in retaining key staff.”


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Steve Bee has slammed Turner’s proposals for a low-cost National Pension Scheme, describing it as ‘privatised welfare’ and careless in its disregard for advice.The Scottish Life head of pensions says the scheme ignores the need for advice and pre-supposes the pension is a suitable investment.He said the scheme will polarise the market with providers concentrating […]

Manoir maketh the woman

Gloucester mortgage adviser Della Price of Mortgage Advisory will be enjoying some fine dining, courtesy of Standard Life. Price won the insurer’s online protection competition by correctly answering three questions about the system and was the name drawn from more than 2,000 entries. The prize is a dinner and a night’s accommodation at La Manoir […]

‘Another waste of time that will be consigned to dustbin of history’

Leading IFA commentators are sceptical about whether the Government will imple-ment any of Turner’s planned sweeping changes to the pension system. Informed Choice managing director Nick Bamford says the report will be consigned to the dustbin of history, similar to the fate of the Department for Work and Pensions-sponsored 2002 report by Alan Pickering. Bamford […]


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