Key words such as "simplicity" and "flexibility" have figured prominently in the DWP's document out ...
Key words such as "simplicity" and "flexibility" have figured prominently in the DWP's document out today, including in relation to its proposals for the Minimum Funding Requirement (MFR).
Describing the MFR as "a flawed approach", the department says it intends to replace it with scheme-specific funding arrangements.
The new requirements will allow schemes greater "flexibility" to use an investment strategy suitable for their members, the department adds.
It estimates that £100m a year could be saved by removing the MFR.
As well as scrapping the MFR, the government will also be reducing the cap on the mandatory indexation that is currently required of schemes.
Indexation is capped at 5% each year, but this will be reduce to 2.5% as schemes will only be required to index pensions in payment by inflation, as measured by the September annual increase in the RPI.
This could slash funding costs for employers by up to £415m a year, the DWP claims.
Greater "flexibility" is also set to be built into schemes abilities to rationalise the structure of their benefits.
By amending Section 67 of the Pensions Act 1995 – which heavily restricts schemes' capabilities to make any changes without first asking members – the government hopes it will encourage employers to provide pensions.
Finally, "simplification" to legislation in other key areas, such as tax and contracting out, will be implemented in a bid to make it easier for employers to manage pension schemes.
The increase in minimum AE contributions has had little impact on opt-out rates - with cessations after April increasing by less than two percentage points, data from The Pensions Regulator (TPR) shows.
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