
Govt ‘must act' on collective pensions to boost savers' pots, report urges

Pension savers in defined contribution (DC) schemes could see their pots increase by a third if the government moved to introduce collective DC schemes, according to a report.
The RSA report, Collective Pensions in the UK II, said as a result of regulation standard DC pensions have become the only option for savers and they have suffered as a result.
It said as defined benefit pensions "withered away" a new framework was urgently needed if people were to save adequately and effectively for retirement.
As auto-enrolment sweeps across the working population most new pension savers will find themselves using a standard DC scheme.
RSA wants the government to revisit the idea of ‘collective DC' where the risk of pension scheme investment is shared between sponsors and members more equally.
Members of the collective DC scheme pool their assets in order to receive a smoother return, benefit from lower fees and expenses, and receive a pension from the scheme rather than buying an annuity from an insurance company. Financial risk sharing and mortality risk sharing are additional benefits.
The report found collective set ups - like those in operation on Denmark, the Netherlands and part of the US - result in savers getting a 33% better outcome, and a more predictable result.
The report said as a nation we spend 6.5% of our GDP annually on private pensions. It argued the move from individual to collective saving would have a considerable positive impact on national welfare, equivalent up to 2% increase in GDP.
Pensions minister Steve Webb has considered collective DC schemes as part of his ‘defined ambition' plans for pensions in the UK.
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