The Government has published its response to its earlier consultation on sharing risks between scheme members and the employers of occupational pension schemes.

Broadly, the Government’s response focuses on the potential for greater risk sharing practices within the current regulatory framework. On this basis the Government states that it will:

  • consider ways to make more widely available information about current risk sharing practices;
  • consult by spring 2009 on ways to ensure that schemes can introduce flexibility in the way pensions accrue benefits for future services to reflect changing longevity;  
  • examine whether to abolish the requirement for cash balance schemes to index pensions in payment; and
  • carry out a review the burdens imposed by the arrangements for contracting-out with the scope and timetable of the review being communicated by early spring 2009.  

The Government has said that based on the evidence it has received so far, it does not intend to remove the mandatory indexation of pensions in payment.

The Government has also stated that it does not intend to pursue proposals for conditional indexation at this time. However, it said that, it will continue to explore the possibility of a collective defined contribution schemes which focus on sharing risk between scheme members rather than between each member and the employer.