Why there is no point in a pension scheme that nobody joins.
While companies - and those wishing to bid for them - wrestle with their pension deficits, the Department of Work and Pensions has been wondering what sort of pensions it might try to promote now it is cruelly clear that nobody is buying its last big idea, the "stakeholder".
Rather than lash out on its own again, it commissioned research on the options from people who know what is going on.
When a company closes a final salary scheme it has become customary to replace it with a "defined contribution", money purchase, package.
The employee pitches in a fixed amount each month, matched, perhaps, by the company. The money goes to build up a capital "pension pot" for the individual to buy a pension when the time comes. In real life it is less simple than it sounds.
Defined contributions suit the company, though. There can never be a deficit, because all the investment risk is shifted to the employee. Unless the company goes out of its way to be generous, it can also be cheaper.
The catch is that people don't join them. Employees don't want pensions that are hostage to the investment risk that the company finds unacceptable - the more so when they have no say in how the trustees invest their money.
If the investments do badlyyou get a miserable pension. If they do well, you risk falling foul of Gordon Brown's means test, unless some future Chancellor scraps it.
Anyway, the income the pension pot buys at the end of it all depends on actuarial rates prevailing at the time, which nobody can guess. Result: nobody joins the new scheme. That saves the company even more money, but at the cost of looking like a rotten employer.
Barclays was one of the first to think again. It came up with a "hybrid" scheme seeking to share the investment risk between employer and employee.
There are all sorts of ways of setting about this. The DWP asked the actuaries Hewitt Associates to look at them and yesterday it published the report by Kevin Wesbroom and Tim Reay They provide ample choice. There is a real hybrid, adopted by British Aerospace - a low-grade final salary scheme where members accumulate 100th of their final salary as a pension each year, coupled with a money purchase fund guaranteed to rise by two per cent.
At the other extreme is the Government's own proposal for the Civil Service, not a hybrid at all.
Each year's salary-linked contribution would be revalued with inflation.
This has the virtue that the money can be invested in inflation-linked Government stock to produce the required result with no risk of a deficit - and equally no way of telling what sort of pension the "pot" will buy. Unsurprisingly, the unions hate it.
Another variant is a money purchase scheme for new employees, followed by a final salary deal for those who are still with the company after, say, five years.
Not simple stuff. In the end, there is no point in a pension scheme that nobody joins - and they won't join something they don't understand