Millions of workers could eventually benefit from better retirement savings when a new type of pension scheme is introduced to the market, under proposals rubber-stamped by the government.
Work and pensions secretary Amber Rudd has backed plans for the first Collective Defined Contribution (CDC) scheme in the UK after the pensions industry, insurers and other bodies welcomed the move proposed by Royal Mail and the Communication Workers Union (CWU).
Rudd said: "Introducing a completely new pension scheme to the market is yet another revolutionary reform in this government’s quest to transform the retirement saving culture in this country.
"These pioneering proposals should deliver improved investment returns for workers and savers while cutting costs and red tape for British job creators.
"The new type of pension is currently used in Denmark and the Netherlands - 2 countries widely recognised as having among the best pension systems in the world.
"Any steps that result in better saving returns for workers are something to celebrate and I look forward to working with industry to enhance the prospects of millions of workers."
CDC pension schemes offer a regular retirement income by allowing group contributions to be pooled together and invested to give members of the scheme a higher final benefit level.
The new schemes are expected to appeal to companies who want to offer strong pensions provisions to employees without having to hang on to enormous pension liabilities.
