Queen’s Speech 2014: Dutch-style collective pensions to be introduced

This article was last updated on April 16, 2022

Canada: Oye! Times readers Get FREE $30 to spend on Amazon, Walmart…
USA: Oye! Times readers Get FREE $30 to spend on Amazon, Walmart…

2014 Queen’s speech on Wednesday has announced to introduce Dutch-style collective pensions in the fresh reforms.

The speech comprised of a limited number of bills with the more focus on enterprise, however, the government would be judged by its actions rather than the number of bills it passed.

According to the new plans, giant “pooled” pension schemes with the potential to boost people’s chances of getting a better retirement outcome have been revealed.

The Queen’s Speech has unveiled the bill that will enable “collective schemes” that spread the risk between members and could offer them greater stability over the eventual size of the pension they will end up with, while limiting costs to employers because of their economies of scale.

Such pooled schemes on the same pattern already exist in the Netherlands and a consultation into collective pensions had previously been launched by the Government.

The new type of pension would be a middle way between the two types of schemes that presently exist – defined benefit (DB) schemes, which offer people a guaranteed level of income when they retire and defined contribution (DC) schemes, which put the burden of risk onto the employee in terms of the eventual size of their pension income.

However, the employers decline the DB schemes – the final salary pensions, in favour of DC schemes, due to the reason that they view the former method as expensive to run as people live for longer.

In this scenario, the Government plans to define the new pattern in terms of the “pensions promise” to be offered to people, to clearly spell out whether the pension they are paying into offers them a full, cast iron promise about their retirement income, a promise on part of their pot or income or no promise at all about what they will end up with.

The speech has also established that people aged over 55 in the future will be free to cash in their pension as they see fit, subject to their marginal rate of income tax.

It is intended that from April 2015, people can use their pension pot like a cashpoint and they will not feel forced into using the money to buy a fixed retirement income called an annuity.

More than 300,000 people who retire every year with DC pension savings will get a much wider choice about how they access their pension savings as a result of the pension reforms.

Article viewed on Oye! Times at www.oyetimes.com.