Press Story

Pensions Minister, Steve Webb, says he will change the law to allow pension reform in line with recommendations from the think tank IPPR and other advocates of pension reform.

Dutch-style 'collective pensions' are the most popular option with the British public for their retirement saving, according to a report published by the think tank IPPR late last year. This type of pension is currently illegal in the UK despite working well abroad, and would allow private sector workers in factories and shops to "club together" in the same way that public sector pensions allow teachers and nurses to.

Pensions Minister, Steve Webb, told The Times:

"Some of the best pension schemes in the world are run on a collective basis. I would like to see British workers have access to schemes run on this basis. Many pensioners have been getting a very poor return on their savings in recent years. This scheme will give them a guaranteed, index-linked return and will be particularly attractive for women pensioners who will draw the higher pension for longer."

Imogen Parker, IPPR Research Fellow, said:

"Last year we published a report calling for the Government to introduce Dutch-style collective pensions in to the UK. The evidence shows that collective schemes allow pensioners to get a retirement income that's around a third higher than with a traditional 'Define Contribution' pensions. By sharing risks associated with pensions amongst savers, keeping finances invested for longer, and offering a retirement income straight from the investments, these pension schemes cut out the annuity process altogether.

"A collective pension was by far the most popular idea for realistic pension reform. People didn't just think they personally would do better out of a collective scheme, they thought it was fairer for everyone to share the risks and rewards, which individual savers have little control over."

Collective pensions are used in the Netherlands and Denmark, where employers and employees pay a fixed contribution but the pension risk is shared between members. In the Netherlands, pensions are paid direct from the collective fund, in proportion to a person's contributions, so there is no separate annuity - which is one of the aspects the public are most worried about.

IPPR's report shows that, as well as being popular, the public could have a far higher income from a collective pension, because of lower fees and shared risks. The average fee for a collective pension in the Netherlands is just 0.15 per cent - far lower than the government's proposed cap of 0.75 or 1 per cent. And recent calculations for the government found enrolling in a collective scheme could give people a retirement income that was a third higher than an individual pension.

The report also shows that the majority of the public don't understand the UK pension system, even in broad terms, and are very concerned that they are not getting the best deals. Given the complexity of pensions, the public like the idea of sharing risks and rewards with other members for private pensions, as well as for the state pension, rather than taking on all the risk themselves.

Notes to Editors

Pensions Minister Steve Webb's interview in The Times is available here: http://www.thetimes.co.uk/tto/money/pensions/article3986877.ece

IPPR's report - 'Defining ambitions: shaping pension reform around public attitudes' - will be available here: http://bit.ly/IPPR11684

IPPR held nine focus groups around Britain between August and November 2013 with over 60 people who were currently in employment.

IPPR's report 'Putting pensions to work: Economic easing and the role of pensions in promoting growth' is available here: http://www.ippr.org/publications/55/8365/putting-pensions-to-work-economic-easing-and-the-role-of-pensions-in-promoting-growth