Last Tuesday (7 February), UK Pensions Minister Steve Webb called for a middle-ground 'defined aspiration' pension in a speech delivered to the National Association of Pension Funds (NAPF) chairman's dinner.

The idea proposed by Webb at the event is not a new one (a hybrid scheme that would sit between a defined benefit scheme (DB) and a defined contribution (DC) one), but what is new is having a Minister openly championing it.

The minister's proposal, however, is based on the premise that 'defined aspiration' schemes would not be subject to the strict regulations of a DB scheme. In fact, he wants them to more resemble a common structure found in the Netherlands.

The idea is that without strict funding levels and other regulations which might weigh heavy on sponsoring companies' balance sheets, the offering is easier to maintain and would still give members a better pension upon retirement.

Webb reportedly told the NAPF: "Could we move away from the strict divide between defined benefit and defined contribution? Is there a third option, which would ensure that individuals are not left to shoulder the entire risk of their pension saving, and employers can offer pensions within a lighter touch regulatory regime?"

The plans come at a time when it is increasingly difficult for sponsoring companies to maintain an expensive DB offering to their staff. Last month Shell became the last FTSE 100 company to close its final salary scheme, instead offering its members a career average plan (CARE).

In November, Pension Funds Insider spoke to former chairman of the NAPF Alan Pickering who first aired the plans of the minister. Asked what Pickering saw as the future of pension provision in the UK he said: "One of the heartening things I see at the moment is Steve Webb's willingness to explore a 'third way', something in between DB and pure DC."

Pickering said he "lived in hope that before too long we will able to find that third way which doesn't cripple employers but just provides members with more security than is the case in a pure DC environment."

azeevalkink@wilmington.co.uk