MPs launch inquiry into 'defined ambition' pension schemes

An inquiry into how retirement savings plans which are common in countries such as the Netherlands, Denmark and Canada might work in the UK has been launched by MPs.

The Work and Pensions Committee will look at whether "defined ambition" pension schemes could help tackle retirement savings problems.

This type of scheme is seen as a middle ground between defined benefit schemes such as final salary pensions, which promise savers a certain level of income when they retire, and the increasingly common defined contribution pension schemes, where savers bear the risk of how much retirement income they will end up with.

Defined ambition schemes have a target or ambition amount they will pay out, based on a long-term, mixed risk investment plan.

They aim to pay out an adequate level of index-linked pension for life - but this is an ambition rather than a contractual guarantee.

Frank Field, who chairs the committee, said: "What the select committee is aiming for is to retain some of the best features of company schemes in a different age when employers are no longer willing or able to sustain the burden of final salary promises to employees, who could instead club together and pool the risk themselves."

The committee is inviting evidence on questions such as whether savers would understand and trust income "ambition" and whether there is an appetite among employers and the UK pensions industry to deliver such schemes.