According to the ACA, the government should become more flexible in its workplace pensions laws.
Laws on making retirement savings through a workplace pension scheme must be shaken up, a major insurance group said in a new report released today.
The Association of Consulting Actuaries (ACA) said in its study that something must be done about the decline of the final-salary pension scheme in Britain. It advocated the creation of a "middle way", where new workplace pensions would combine features of final-salary and the increasingly prevalent defined contribution schemes.
Employers are closing their final-salary plans to new members in increasing numbers, as they are generally more expensive to maintain as they offer stronger guarantees of retirement income to employees. Defined contribution plans, on the other hand, are cheaper to run but can offer far smaller incomes - and are more exposed to volatility on financial markets.
The recession has sped up the rates of closures, as more and more employers struggle to balance the books. Recent figures from the Pension Protection Fund show that collective final salary scheme deficits have hit £242 billion in the UK.
Keith Barton, chairman of the ACA, commented: "Our challenge, as leaders in pensions, is to design pension arrangements which are attractive enough for employers to see the value in offering them and for individuals to want to join. For employees, these arrangements need to offer reasonably predictable levels of retirement income and not be subject to excessive volatility."
He added: "The ACA has been arguing for some time now that legislation needs to change to allow far more middle way pension designs than is presently possible."
