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Defined Benefit Green Paper

20/02/2017

Rachael Griffin, tax and financial planning expert for Old Mutual Wealth:

“The government undoubtedly faces a consumer and trade union backlash against these proposals, despite the fact they appear to be a long way away from reaching a conclusion. 

“The government’s paper stimulates a much-needed discussion relating to the future funding of this type of pension scheme in the private sector. However, the possibility of using a new measure of inflation or even allowing schemes to suspend inflation indexation altogether will be a contentious point.

“It would be likely to save money for businesses while at the same time reducing pensions for scheme members. Similar measures have been considered in the past but did not gain traction  because government was partly concerned about a backlash from millions of pension holders.  

“On the flip side, DB pensions have turned out to be far more expensive than most could ever have imagined. Factors such as significant increases in life expectancy mean that companies are now having to pay much more than originally anticipated to fund pensions for their former employees decades after they finish work.

“It is easy to see why business wants some room to help it meet the cost of paying pensions, especially given recent high profile cases where the weight of funding the pension scheme has had a serious impact on the business.

“It is possible that some DB pension holders may accept these proposals if they believe that it makes their pension more secure. This is what happened at Tata Steel, where pension scheme members voted to reduce their benefits.  Although the Pension Protection Fund (PPF) supports workers and retirees if their scheme goes under, it may pay them less than they might have expected.

Rachael Griffin“For those people with private sector DB scheme benefits, it is worth planning ahead. Members can get a transfer value quotation from their DB scheme once a  year. This will tell them how much could be invested into pension scheme. At present, transfer values are at record highs and many people have chosen to transfer from their DB scheme to benefit from the pension flexibility options offered by defined contribution (DC) pension schemes, such as personal pensions. However, as there are costs and risks involved in this course of action, it is essential to take advice beforehand. A professional financial planner will also be able to help you identify, and make up for, any shortfall if your projected pension benefits are lower than they expected.”

For more information contact

Michael GlenisterOld Mutual Wealth020 7778 963807469 144535michael.glenister@omwealth.com

Notes to editors:

About Quilter plc:

Quilter plc is a leading wealth management business in the UK and internationally, helping to create prosperity for the generations of today and tomorrow.

Quilter plc oversees £116.5 billion in customer investments (as at 30 June 2018).

It has an adviser and customer offering spanning: financial advice; investment platforms; multi-asset investment solutions and discretionary fund management.

The business is comprised of two segments: Wealth Platforms and Advice and Wealth Management.

Wealth Platforms includes the Old Mutual Wealth UK Platform; Old Mutual International, including AAM Advisory in Singapore; and the Old Mutual Wealth Heritage life assurance business.

Advice and Wealth Management encompasses the financial planning network, Intrinsic; Quilter Private Client Advisers; discretionary fund management business, Quilter Cheviot; and Quilter Investors, the Multi-asset investment solutions business.

The Quilter plc businesses are being re-branded to Quilter over a period of approximately two years:

• The Multi-asset business is now Quilter Investors

• Intrinsic to Quilter Financial Planning

• The private client advisers business is now Quilter Private Client Advisers

• The UK Platform to Quilter Wealth Solutions

• The International business to Quilter International

• The Heritage life assurance business to Quilter Life Assurance

• Quilter Cheviot will retain its name

This press release is for journalists only and should not be relied upon by financial advisers or customers.

Please remember that past performance is not a guide to future performance. The value of investments and the income from them can go down as well as up and investors may not get back any of the amount originally invested. Exchange rate changes may cause the value of overseas investments to rise or fall.

This communication is issued by Quilter plc.  Registered office: Millennium Bridge House, 2 Lambeth Hill, London EC4V 4AJ, United Kingdom. Registered number: 6404270.  Registered in England.