The Government has been accused of acting too "timidly" over proposed changes to pension schemes.

The Department for Work and Pensions has said it no longer plans to amend laws to allow the introduction of pensions that would split the risk between employers and their staff.

Currently a majority of pension plans are based on a defined benefit plan. These place all the risk of investment returns on the employer, but defined contribution schemes place all of the risk on the employee.

The Government had previously said it would look at creating a new pension scheme that would spread this risk more evenly.

Instead it now says it will continue to will continue to work with companies on advising them on risk-sharing practices in the area.

The Government has also said it will no longer be allowing the underfunding of schemes to reduce the amount by which they increase pensions and accrue benefits in line with inflation each year.

The Association of Consulting Actuaries has criticised the Government for being too "timid" and warned that this kind of approach will make private sector pensions "far inferior" to those available to public sector workers.

It said: "The failure to act by the Government shows a lack of boldness in supporting the pension needs of private sector employers and employees.

"Without a new middle way option that better allows employers to cap defined benefit costs for the future, the vast majority of private sector employees will be moved into defined contribution schemes, with the volatility in outcomes associated with this design."

But Brendan Barber, TUC general secretary, said: "The Government is absolutely right to have rejected the call to free pension schemes from their already limited obligation to index pensions to inflation up to a maximum of 2.5%."

Under new plans the Government has also said it is considering increasing the retirement age under the current regulation.

At the same time it said it will look at the burden placed on pension schemes for contracting out.

Copyright © Press Association 2008