Report: Simplifying pension benefits – is it time for the Pensions Pound?

A new paper by the Association of Consulting Actuaries and Royal London argues that consumers and employers could reap substantial benefits if the complex patchwork of defined benefit (DB) pension rights could be radically simplified.

Key findings

• DB pensions are increasingly out-of-step with other savings opportunities available to consumers. They no longer reflect how people live their lives and the rigidity of them stops employers from consolidating schemes to take advantage of economies of scale to improve governance.
• The paper suggests that by simplifying DB pension delivery, members can understand their benefits as ‘pension pounds’ they can use in a way that suits them; improves scheme governance; reduces the risk of errors and misinterpretation of benefits; and paves the way for consolidation of the DB pensions market.
• Simplification does not mean a reduction in the expected value of members’ benefits, but rather legislation would change to allow them to be re-shaped.

This paper considers the detail of the current complexity in the system, and how this could be removed by simplification.