HMT and DWP Consultation Response 'Unlocking the UK pensions market for growth': Hymans Robertson Comments

Commenting on the HMT and DWP ‘Unlocking the UK pensions market for growth’ Consultation Response, Alison Leslie, Partner and Head of DC Investment Services, Hymans Robertson says:

“The government has laid out bold and ambitious plans to drive scale with today’s consultation response. It strikes a good balance between the £25bn ambition and the need to recognise that a transition pathway is essential for other arrangements, which offer real benefits whether in innovation or for religious or ethical reasons for which we are very supportive.  We remain of the view that the market is best served through the diversity of providers, and innovation must not be crowded out where value to members can be proven. Challenging remaining defaults through the three-step process we believe is also important and should currently form part of a scheme’s good governance process so this shouldn’t be overly onerous. 

“We welcome not mandating investment in the UK. We believe that those responsible for the arrangements should be given proper authority to invest as they see best for their members, which should potentially include good private market opportunities already available to them in the UK. These opportunities should stand on their own merits. We welcome the 10 Year Infrastructure Strategy to alleviate concerns regarding the pipeline of opportunities available, as we view this as a potential barrier in the government achieving their ambitions. A National Authority which supports the drive is welcomed, and we believe necessary, to give the drive and oversight required to unblock issues as they arise and push forward the change that the government wants to see in terms of UK investment.”

Commenting on the HMT and DWP consultation response ‘Unlocking the UK pensions market for growth’, Kathryn Fleming, Head of DC Consulting, Hymans Robertson says:

“We welcome today’s consultation response, ‘Unlocking the UK pensions market for growth’, and are pleased to see a package of proposals for change, projecting 10-15 DC Megafunds by 2030, and an improvement in member outcomes in the region of 3%. We fully support the drive for scale and the benefits that setting a minimum size of assets under management, at £25billion, can bring. However, the implementation of such an approach will take time, which the government recognises, and we remain concerned about the potential for this to reduce innovation at a time when it is needed most. Collective Defined Contribution (CDC), a relatively new and exciting area for the defined contribution market is supported in the consultation response, and creating a minimum size exception seems practical and sensible. Given how new this is to the market, the need to grow the multi-employer CDC market and ensure confidence and trust in CDC, is a valid starting point for the government to take.

“Turning to employer duty, it is understandable that the government has opted away from yet more regulation – and associated costs to employers – at this stage when many are facing an array of changes. There remains a risk that members who are currently in ‘average’ schemes will miss out on opportunities for better value and ways to further increase their pension pot. It feels absurd that the regulatory regime for advising one individual on their pension is stricter than advising an employer on the provider for their entire workforce – and something that goes against everything the industry is doing to ensure better retirement living standards for the majority of members.

“It is disappointing that the pensions industry is still waiting for a confirmed date of when the Pension Schemes Bill will go live. We would have liked to have seen this released in tandem to today’s update to provide an overarching theme and better understanding of the government’s desire for the future of pensions – helping to clarify and provide comfort for the pensions industry, today’s pensioners and those on the cusp of retiring.”