Occupational pensions forall employees Available to Purchase

Defined benefit occupational pension schemes are a valuable employee benefit. This paper looks at problems in their design and considers whether it is possible to address them. The risk profile of money purchase schemes is described, with particular reference to employees in less secure employment categories. These considerations are set alongside the requirements employers have from occupational pension schemes. The conclusion is that money purchase schemes fail to meet employees’ needs, in particular at a time when the security and level of state pensions is being progressively eroded. An alternative defined benefit structure is proposed, that is, the revalued career average pension scheme. It is argued that this benefit structure can be made attractive to both employers and employees, as it addresses many of the problems associated with final salary schemes and provides pension scheme members with the security they value.