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The consultation paper lays out a number of potential approaches to allow for greater risk-sharing and proposed several new defined benefit (DB) models, including a core DB with a flexible additional payout in the form of either conditional indexation or an additional payment.
Of the four models proposed as a way of increasing certainty for DC members, the DWP said it would consult on a money-back guarantee system, the possibility of investment guarantees, a retirement income insurance model and a retirement income builder, based around systems in place in Continental Europe.
The paper adds: “As a result, the individual has a degree of pre-retirement certainty over their retirement income and can always see some benefit for each additional year of contributions, as the guaranteed element increases". The department notes that, for both the ATP-inspired approach and a CDC model, scale and “sufficient” inflow of new members will be key.
The deadline for the consultation is 19 December, 2013.
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