Book Description

The Pension Schemes Bill introduces new definitions to the legislative framework for private pensions based on the type of promise that pension schemes provide for members during accumulation. The current legislation is based on a binary structure between money purchase schemes, which offer no certainty over retirement benefit, and nonmoney purchase schemes, which have traditionally offered salary related pension benefits. The non-money purchase scheme category can cover a range of different pension benefit designs that offer varying degrees of certainty over benefit. However, the legislation is often perceived as offering two main options, and much existing legislation is written on the basis of a polarity between these options. The Bill will thus define three categories of pension scheme based on the different types of promise offered to members during the accumulation phase about their pension savings when they come to access them (also termed decumulation). This promise will either refer to all of the benefits (defined benefits), some of the benefits (shared risk), or there will be no promise (defined contributions). The Bill also includes measures to enable the provision of collective benefits. Collective benefits are provided on the basis of allowing the scheme's assets to be used in a way that pools risks across the membership.