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Don&#39t put down defined benefits

Defined contribution has become the politically correct pension. Baroness Hollis of the Department for Work and Pensions has described the defined-benefit pension as the pension for white middle-class men, coming close to calling it a fat cat pension.

Hollis&#39 comments bring a dangerous dimension to the debate about pensions.

Company pensions are this country&#39s great pension success story. The fact that many are funded means the UK&#39s books balance on a national level and for the most part on a company level, in stark contrast with many of our European peers.

Countries such as Germany, France and Italy are at last reforming but would give their eye teeth for anything resembling UK funding levels. Of course, the UK&#39s company pension system has not been without problems, with Maxwell the worst example.

But surely the benefits of defined-benefit pensions are worth preserving where possible and extending where appropriate?

The Government&#39s record is less auspicious. In the midst of an equity boom, it cavalierly took a cut from pensions and pensioners. It then failed to anticipate the impact of FRS17.

Much of the hope for stakeholder, the IPA and widespread equity investment was pinned on a continuing bull market. The investing public and the investment industry were suckered by the stockmarket boom but so was Whitehall.

In this new environment, the denigration of defined-benefit pensions is not required – what is needed is a dispassionate balanced assessment of the strengths and weakness of this type of pension alongside an assessment of other savings vehicles.

As both Government and companies transfer investment risk on to the public, we need straight talking – not some spin doctor&#39s excuse.


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