Employers should be allowed to roll back some pension benefits promised to their staff because the costs have become too burdensome for the economy as a whole, Christine Farnish, chief executive of the National Association of Pension Funds, will say on Friday.
In a speech to the annual conference of the NAPF, Ms Farnish will add the voice of the employer-sponsored organisation to a chorus of demands to allow employers to alter retrospectively their pension promises.
?Employers now face costs and risks to their pension schemes that were never there in the past,? Ms Farnish says in remarks prepared for the conference. ?The scale and magnitude of these and the future uncertainties are far greater than anyone had ever imagined.?
At the NAPF?s investment conference earlier this year, two prominent industry leaders made similar calls for a rollback in pension promises.
The government appears to be listening. In its recent white paper on pension reform, it said it would consider whether there should be discussion of changes to legislation that would make it possible to scale back promised benefits as a growing number of employer bodies are urging.
John Hutton, pensions secretary, said on Thursday that nothing was ruled out of its review of pension regulation, telling the NAPF conference that the industry should drive ?both the content and scope? of the review.
Mr Hutton said ?nothing is off the table? in the review, and the government?s objective ?is not about merely re-writing legislation or tinkering around at the edges, but a real drive to cut red tape and make it easier for you to deliver workplace pensions?.
However, legal experts have pointed out that rolling back benefits, which are in effect deferred pay, may be very difficult. Benefits promised under employment contracts have been upheld in the courts and reaffirmed in a recent case involving pension benefits at the consultancy firm KPMG.
Also, any move to roll back accrued pension rights is likely to prove highly unpalatable for politicians.
Ms Farnish, in making her case, points to successive legislation that has made pensions increasingly expensive, from the requirement to index pensions for deferred members to a requirement to provide pensions for widows and widowers. The fact that life expectancy has risen so sharply in recent years has also vastly increased the cost of defined benefit pension provision, she said.
In considering whether to allow a roll-back of benefits, the government must weigh the collective interest in the economic competitiveness of businesses against the interest of individuals in getting a fair deal and having promises honoured, she said.
Among the possible changes to company pension promises, Ms Farnish suggested that the government should drop the requirement that employers index pensions in payment in line with inflation, which has been required for all benefits accrued after 1997.
In addition, she suggested that employers be allowed to increase the normal retirement age for workers to take account of rising longevity.
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