In a recent episode of the Lang Cat podcast aired on August 30 the then Pensions Minister Guy Opperman commented that, when considering the consolidation of defined contribution pension schemes “I personally believe I’ve been too timid.” - suggesting that he’d like to do more to push forward consolidation. Although Opperman has since left his post, we nonetheless wonder what more his replacement might do.
We speak to many pension Trustees on a day to day basis including professionals, company appointed and member nominated trustees. I think all would agree that the regulatory requirements and time required to meet duties as a trustee of a defined contribution pension scheme have increased drastically over the last 5 years or so.
This regulatory demand has been one of the most significant drivers for pension consolidation and often feels like a “big stick” being wielded.
Guy Opperman did stress that the end goal was to ensure good pension outcomes for members (the “carrot” in this situation) but arguably not the tool that has been invoked most by TPR.
So, it begs the question – what do we think about consolidation and the approach to achieving it?
We truly believe in the carrot. The best outcome from consolidation is that we are only left with well run schemes that provide members with the best outcomes from their pension savings. Bigger is often better due to economies of scale, but we must remember that a well run smaller scheme can still provide great value for members particularly when its tailored for the membership.
The stick can be effective. The additional regulatory pressure has, without a doubt, been effective. We’ve seen a significant number of pension schemes consolidate into master trusts and we’ve seen a significant number of master trusts consolidate into others, leaving us with a smaller but better run set of arrangements.
…but there is a missing element. As noted in TPR's latest DC survey, at that time only 1/3rd of small schemes (those with less than £100m assets under management) were aware of the new regulatory requirements for the Value for Members assessment.
Our key takeaways are:
Consolidation is important and is driving good member outcomes
Don’t be timid, Pensions Minister!
Well run schemes that continue to provide value for members remain important and viable.
Don’t be timid if you’re an effective Trustee
TPR and DWP need to do more to inform and educate pension trustees, employers and members.
Don’t be timid as an industry! Providers, advisers, and regulators need to get this message out there.
The industry is heading in the right direction, but there’s certainly more to be done.
For more on pension consolidation and what actions you need to take, join our upcoming webinars on DC, larger DB and smaller DB schemes. Find out more and book your placehere.
The most common phrases we heard about investment markets in 2020 include words such as 'torrid', 'unprecedented', 'shock' - and the list goes on… however, what has this really meant for the pension savings provided to your employees and pension scheme members?