A new defined ambition (DA) pension option proposed by the government has met with a mixed response from pension experts.

The chief reasons for the cool response to the new plan appear to be concern over its timing and the fact that it represents an additional complexity to an already complex system.

Tens of thousands of SMEs, including numerous Umbrella Companies, are striving valiantly at present to meet the many challenges of auto-enrolment. An additional scheme during such a complicated process is seen by many as a potential non-starter.

Tom McPhail, head of pension research at Hargreaves Lansdown, said that employers may be reluctant to adopt the new scheme after the rigours of auto-enrolment, despite its good intentions. He warned: “Whoever does first embrace this new type of scheme will have to bear all the set up costs whilst having to wait many years to reap any benefits.”

Intended as a third alternative to the existing defined benefits (DB) and defined contributions (DC) pension options, DA pensions were unveiled by pensions minister Steve Webb last week as part of the forthcoming Private Pensions Act.

Darren Philp, head of The People’s Pension, welcomed the coalition’s embrace of pensions innovation but suggested that the DWP should tackle the basics of existing reforms before introducing a new option.

“Just adding more complexity on top of an already complicated system risks confusing employers and savers. So far the government has failed deliver simplicity, transparency and comparability in charging. Without this consumers risk getting a raw deal,” he explained.

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