Coalition plans shake up of UK pension system

 
Kasmira Jefford
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WORKERS could be given the opportunity to boost their pensions under proposals being considered by the government to tackle falling retirement incomes.

Steve Webb, the UK’s pensions minister, wants to shake up the pensions market by introducing collective defined contribution schemes (CDCs), similar to those already used in the Netherlands and Denmark. The approach would pool the schemes of big employers, which the government hopes would create economies of scale, reducing costs for employers and improving returns for investors.

A report by the think-tank RSA published in 2012 estimated that collective investment can provide 37 per cent better returns.

Firms have been closing their defined benefit pension schemes as higher life expectancy and high inflation have made it too costly for them to offer workers a payout when they retire.

A spokesperson for the department for work and pensions said the plan formed “an important plank” in Webb’s vision going forward.

“The aim is to give employers an opportunity to continue with decent pension schemes that isn’t so costly for them,” he added.