Sacker & Partners LLP have announced the results of its most recent webinar survey*. Asked which policies in the Pension Schemes Bill they would prioritise, 36% of respondents supported the introduction of default retirement income solutions with a further 23% opting for surplus changes, with these areas of policy focus being preferred over value for money, deferred pots consolidation, “Megafunds” or “superfunds”.
Sackers partner Janet Brown said:
“It is clear from the publication of the Pension Schemes Bill, and the accompanying roadmap of indicative key dates, that the Government is gearing up for a major shift in the pensions landscape. The Bill sets out the bigger picture with understandably many more sets of regulations and guidance to come to fill in the finer important detail. We agree with our survey respondents that surplus is one of the more interesting areas of the Bill. The proposals demonstrate that the Government does want to “safely release surplus”. Trustees and employers may wish to use the time between now and 2027, when the new trustee resolution flexibilities are due to come into force, to plan ahead and agree their approach on how they would use surplus.
“As we noted in the webinar, many clients are already being innovative and imaginative in planning for the use of surplus, including how to do so without necessarily intending a full “release” of a DB surplus (less tax) back to the employer as part of that scenario. Even though surplus is clearly back in fashion, in our view, these changes won’t move the dial significantly and they certainly won’t result in the return of £160bn to employers and UK plc which the Government’s press release quoted on 5 June, at least not any time soon. We would really like to see the Government allowing one-off lump sum authorised payments to members, which we know it is considering, as we think this could have a real impact in unlocking negotiations over surplus.”
Turning to the raft of DC developments in the Bill, Sackers partner Jacqui Reid said: “From Megafunds to mandation to small pots, the DC changes in the Bill are wide ranging. Our survey respondents have rightly picked up on the significance of the proposed changes for default retirement income solutions which will introduce a new trustee duty to design and implement solutions from 2027. Everyone has work to do here, whether you already have a solution and need to check how it will meet the new requirements, or if you don’t and will need to start from scratch. We are advising our clients to focus on the VFM changes and retirement income solutions first because these are the cornerstones of the Government’s drive for consolidation. But it’s also important to monitor the Megafunds and asset allocation proposals because these will affect schemes indirectly. Above all, we think it’s crucial to consider DB and DC arrangements holistically because of the link into DB surplus policy and its potential use for DC contributions.”
In conclusion Jacqui Reid noted:
“What’s missing from the Pension Schemes Bill is anything on fiduciary duties and improving member outcomes. Unless we tackle the fundamental issue of adequacy and getting members to save more for their retirement, we are in danger of missing the point. We need to be bolder as an industry about getting adequacy higher up the agenda.”
*Based on 62 respondents representing trustees and employers of both DC and DB schemes.
