Pensions - Articles - Industry remains sceptical of pensions consolidation


Research from the Pensions Management Institute (PMI) has revealed that two thirds of respondents think that DB consolidation could succeed. A survey conducted by the institute, which questioned industry professionals on their views, also revealed a degree of mistrust of consolidation in both the Defined Benefit (DB) and Defined Contribution (DC) spheres.

 Participants were not fully confident in the value of DB consolidation, as 33% of respondents said they do not think it is a good idea. Concerns were related to the need for careful regulation and proper management, with some respondents questioning whether commercial operators would really be able to provide consolidation propositions to smaller schemes who would benefit the most. 

 There has been much speculation around whether single DC trusts will transition into DC Master Trusts, but research showed that an overwhelming majority (77%) of participants think that less than half of these schemes will make the transition. The industry outlook for Collective Defined Contribution (CDC) was fairly pessimistic, as two-thirds (67%) of participants said they do not think it will succeed. Respondents expressed concerns that the moment for CDC to flourish has passed, as individual DC pots are now well-established.

 A significant body of industry professionals appear troubled by the direction of travel of UK pension policy. One third (30%) of participants said they were unsatisfied with recent developments, expressing concerns around a lack of joined up thinking between the Treasury, DWP and the Regulators.

 When questioned on the Government consultation process, over one in ten (12%) respondents said that the practice does not result in effect policy implementation, with some participants even arguing that the Government often proceeds with policy in the face of significant objections.

 Lesley Carline, President, Pensions Management Institute, commented: “Whilst our respondents felt DB consolidators will succeed and have a role to play within the UK pensions market, there is concern over governance and security, and a note that they will not help out smaller distressed DB schemes that need a solution to their woes. That said they are not marketing themselves as saviours but as an alternative to traditional options.

 “Our members also remain sceptical towards CDC, which could have proven useful when employers first began to close their final salary schemes. However, there is a risk that the appropriate time for its introduction has now passed as DC pots have become commonplace.

 “With the proliferation of consultations and the promised pensions bill on the horizon, we all hope that the outcomes will reflect the input from the industry and produce effective policy addressing some of the fears noted in the survey response.”

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