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Govt could scrap DB pension inflation link

The Government is considering removing the requirement for private sector defined-benefit pension schemes to be index-linked to inflation, according to the Financial Times.

Under current rules, occupational DB scheme members are entitled to an increase in their pension income of at least 2.5 per cent each year.

According to the FT, pensions minister Steve Webb is considering scrapping the requirement to encourage schemes to retain DB benefits for their employees.

In an interview with the paper, Webb says: “I am saying we shouldn’t just let the pendulum swing all the way to pure defined contribution.

“What I want to do is try and create an environment where the pendulum can swing back a bit.

“If by reducing the regulatory burden we could encourage firms running entirely voluntary occupational schemes … to think ‘well actually, I’ll take on a measure of risk [sharing]’, then that seems like a world we could move towards.

“Clearly indexation is the biggest cost [for companies].”

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Comments

There are 2 comments at the moment, we would love to hear your opinion too.

  1. I used to work for a large life office who often justified low salaries due to the provision of a final salary pension scheme.

    If the requirement to provide indexing is removed surely I should be entitled to back pay as their calculations were invalid?

  2. So this means back to the bad old days of frozen pensions and section 32 buy out bonds?
    Oh and by the way, take note all public sector employees, see how lucky you are????

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