Gareth Sutcliffe: Defined Benefit Pensions are a bad idea

Gareth Sutcliffe, a Conservative Party supporter from North West London and a Fellow of the Institute of Actuaries, argues that Defined Benefit (DB) pension schemes are bad for the economy

DB pension schemes receive the broad support of the Conservative Party and indeed all the main political parties. They have their advantages - DB schemes remove risk from individual workers. They also provide a useful tool to employers for retaining employees. 

But they are a bad idea. Anyone who is lucky enough to be a member of such a scheme would be loath to give one up. But the collective effect of DB schemes is to damage the efficient functioning of the economy through corrosive effects on microeconomic decision making.

This topic may seem arcane but it impinges on us all. As longevity continues to increase and the valuation methods for UK pension funds become more and more onerous the number of organisations that can afford a DB scheme will fall over time to only encompass the government. All of our retirements will be affected – and it is important to decide whether a rearguard action in defence of the DB scheme should be fought. I think not and I will explain why.