Kingston calls for end of defined benefit schemes
COMPANIES should give up trying to reform defined benefit pension schemes and drop them altogether, an investment expert has claimed.
David Kingston, who heads Acuvest Investment Advisers, believes that while defined benefit (DB) schemes were "excellent in their day", their time has passed and "it's now time to give the present form of DB schemes a decent burial".
"Most DB schemes have sunk into substantial deficits and these are not going to disappear easily," he said.
"Quite simply, members of pension schemes are being given promises of retirement benefits that most schemes are in no position to meet.
"The idea that a pension becomes guaranteed simply by being part of a defined benefit pension scheme is nothing more than a myth.
"Introducing measures such as adjusting funding standards and increasing the level of risk reserves is simply tinkering with the problem; we need a rethink of how we provide pensions in the future."
Mr Kingston believes the basic form of pension has to be defined contribution, or a defined benefit pension with flexible retirement ages.
"Pension funds may have a target benefit in mind so that contributions are adequate, but there are no absolute guarantees as to its size or when it is paid out. The industry needs some strategic thinking on the structure and composition of investment portfolios," he said.