Pensions Investment Review Consultation: Unlocking the UK market for Growth

Commenting on the Pensions Investment Review Consultation: Unlocking the UK Pensions Market for Growth, Paul Waters, Heads of DC Markets, Hymans Robertson says:

“We support the Chancellor’s drive for scale and consolidation of lower value legacy default pensions. Larger arrangements provide better value for members and scale is becoming increasingly important in accessing the most attractive investment opportunities for DC pensions scheme savers.

“Yet this move is not without a potential downside. In a world in which there would be a small number of mega DC pension schemes, there is a real risk innovation will suffer, and over the long-term members will lose out. Protection against this can come in the form of strong employer oversight. The proposals to place more responsibility on employers to regularly assess provider value are an essential control for this and should be implemented robustly.

“While greater scale is important, and in members interests, moving too fast could cause more harm than good. For both the benefit of members and providers, a longer timescale than 2030 should be set to allow the consolidation to happen. Disorderly consolidation of smaller providers is in no-one’s interest. There will be capacity challenges for larger employers in taking on schemes, particularly in the context of an already packed program of DC legislative and market change.

“It is also worth recognising that are a number of extremely well governed, and high performing, own trust DC schemes. While the consultation does not address these directly, given the Governments focus on scale, clarity is urgently needed around the implications of this on those single trust schemes.

“CDC schemes are also referenced in the consultation. It is right that CDC is considered here and that in implementing these changes the approach for consolidation of DC schemes into CDC schemes is covered.”