UK - Xafinity Consulting has warned the consultation on trust-based defined contribution (DC) schemes could have a detrimental impact on retirement saving in the UK.

The recently announced consultation will see the Department for Work and Pensions consider the effect of refunds on pension savings.

Under the current model, if a member leaves a trust-based scheme within two years of starting at an employer, that employer can gain a refund of its contributions.

Ken Anderson, head of DC solutions at the consultancy, said that while contract-based arrangements can offer significant flexibility to those enrolled, they can pose other problems.

"Their lack of governance requirements means that, in practice, many individuals are left to make complex financial decisions alone that they are neither capable nor willing of undertaking," he said. "Unchecked, this is likely to have a detrimental impact on retirement saving in the UK."

Anderson added that mastertrust solutions had grown in popularity, as they were both cost-effective for employers and offered effective support to members.

Hymans Robertson had previously argued the consultation would risk killing trust-based schemes and that it was likely to be the result of lobbying on behalf of companies offering contract-based plans.

Meanwhile, the Institute of Directors (IoD), a group representing business leaders' interests in the UK, has outlined its proposals for guaranteeing growth in the current economic climate.

In addition to recommending removing the right for flexible working and abandoning collective bargaining agreements in the public health and teaching sector, the IoD railed against the recent abolition of the default retirement age (DRA).

In its list of 10 'freebie' measures for growth, it said: "Drop proposals to abolish the default retirement age. Why does the government want to make it harder for companies to remove staff who are no longer effective?"

The organisation added that this would not preclude people beyond the default retirement age of 65 from working as long as they were performing.

The IoD added: "By removing the DRA, you are forcing employers, who will have to remove older staff at some point, to manage them out through the normal dismissal procedures. This is immensely time consuming, complex and costly for small businesses and is fraught with the risk of  tribunals."

In other news, asset manager SEI has announced the results of a poll of UK plan sponsors showing that tackling funding shortfalls was their main priority.

According to the survey, three-quarters of respondents cited creating a road map for funding proposals as a priority for 2011, while a further 56% said it was either high or extremely high on their list of priorities.

A further 44% said they would consider fiduciary management in their next selection for an adviser, while 70% said costs in the advisory field were becoming a concern.

Additionally, almost three-quarters said they were considering a change in scheme design, with SEI attributing this to an industry-wide shift in the way retirement benefits are offered.

The survey noted that, despite low bond yields, both buy-ins and buy-outs are being considered as an option by many schemes.

Finally, Spinnaker Master Trust has confirmed HAS Administrative Services as admin provider for its DC scheme.

The announcement comes after Goddard Perry Consulting, which designed the Spinnaker scheme in 2009, acquired HS Admin from Aegon last year.
 

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