The UK's pension minister has said that the establishment of a government-backed defined contribution (DC) protection fund could be the best way to allow for cheap guarantees due to the "challenges" posed by the solvency requirements for private sector approaches.
Reflecting on the potential introduction of a Pension Protection Fund (PPF) for DC schemes in the UK – mooted as part of last year's Department for Work & Pensions (DWP) paper on the reinvigoration of workplace pensions that outlined a number of ways defined ambition (DA) schemes could be introduced – Steve Webb said there were concerns about the solvency capital requirements that would be placed on the private sector if they entered the market.
He said individual banks had discussed with his department how best to achieve guarantees and that the DWP had been examining both the possibility of private and quasi-government solutions – the latter of which, he said, were potentially more able to provide security "cheaply".
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