| LONDON, June 26
LONDON, June 26 Britain took a step closer to
reforming pensions by publishing draft legislation on Thursday
that permits collective workplace pension schemes, despite
criticism of the plans by the industry.
The new rules, which were outlined earlier this year and
should become law before a general election next May, will allow
pension providers for the first time to pool the assets bought
by fund members to reduce risks and cut costs.
Such pooling is already used in other European countries
like the Netherlands and Sweden.
The government said that the reforms were supported by the
industry and were needed to provide more choice and retirement
income security for workers.
"These new proposals are all about encouraging a flourishing
and diverse private pensions market by providing greater choice
to employers and savers," pensions minister Steve Webb said.
However, earlier this month parts of the pension industry
expressed concern that the new rules would add complexity to an
already heavily-regulated sector, may not be more cost effective
to run and could undermine other parts of the government's
Supporters of the collective schemes say they would reduce
costs, as they have the advantage of economies of scale, and
could bring richer returns because assets can be kept in riskier
investments such as equities, rather than being transferred into
safer asset classes as members approach retirement.
The draft legislation also set out a new category of pension
which splits the risk of providing a future income between
employer and employee.
The British pension industry has been moving away from
'defined benefits' schemes where the pension provider bears the
risk of providing a retirement income towards 'defined
contribution' schemes, where the worker bears the risk. The new
middle-ground category is referred to as 'defined ambition'.
(Reporting by William James; Editing by Ruth Pitchford)