With the government publishing its updated roadmap for reform on workplace pensions, advisers now have greater clarity on the direction of travel, from scheme consolidation and value for money reforms to default retirement solutions and pension dashboards. While many of the proposals are aimed at workplace pension providers, the changes will inevitably shape the advice landscape too. As workplace pensions evolve to deliver better member outcomes, advisers will need to consider how these reforms could influence client expectations, retirement planning conversations and the wider role of advice in helping individuals achieve financial security.
We bring you reactions from across the industry:
“We welcome the updated workplace pension roadmap published today by the Pensions Minister, Torsten Bell. It provides the industry with much-needed clarity around timescales and sequencing of changes, and an element of certainty in a time of political change.
We’re pleased that the Government has listened to the pension industry’s concerns about such a crowded pension reform agenda, the sequencing of the various initiatives, and the impact of implementation resource challenges.
We’re pleased that the Minister has accepted the need for a ‘test’ period for implementation of the Value for Money framework, something Aegon strongly argued for. However, the full launch timeline has not been put back as we had hoped.
The first year of the framework (2028) will include just master trusts, the largest single-employer trust-based schemes, and the largest multi-employer contract-based arrangements open to new employers, with no ‘automatic consequences’ based on the assessment outcomes in the first year. The VfM Framework will be extended across the market from 2029, with potential consequences from then.
Contractual override is critical for pension providers to support the VfM Framework and the scale objectives. As previously planned, this will be available to contract-based providers from 2028, before all default arrangements not open to new employers will have to complete their full VfM assessments. This approach is helpful, but legacy defaults, of which there are hundreds across UK pension providers, will still need to complete extensive data returns.
We also welcome the two-year delay for schemes to comply with the Guided Retirement provisions, giving time to work through the policy challenges and align with the proposed retirement CDC provisions.
We agree there is more work to do to ensure that policies are aligned across the pension spectrum for both trust-based and contract-based pension schemes.
Publishing the roadmap opens up a vital opportunity for discussion, for industry agreement and alignment on the most effective way forward and, ultimately, for the improvement of outcomes for our customers.”
Kate Smith, Head of Pensions at Aegon, comments on the Department for Work and Pensions’ roadmap of reforms for DB and DC workplace pensions
“The roadmap confirms that, from 6 April next year, DB schemes will be able to use the new statutory override to release surplus. While the opportunity is significant, so is the amount of preparation required. Employers and trustees should not delay in agreeing a surplus policy. Any scheme with a surplus should have a surplus policy, just as any scheme with a deficit should have a recovery plan.
Importantly, these new flexibilities are not just for schemes that are running on. Schemes that have already completed a buy-in, or are contemplating one, may also be able to unlock surplus earlier and in new ways, including potential lump-sum payments for members. For schemes that are planning to run on, their surplus policy will need to be underpinned by safe strategies, robust governance, and efficient processes for releasing surplus.
The message from the roadmap is clear: there is a lot to do, and schemes that start preparing now will be best placed to take advantage of the new regime from day one.”
Tom Froggett, Partner and Head of DB Run-On at XPS
“The updated roadmap is a welcome development, giving us greater clarity on when the measures in the Pension Schemes Act will be implemented. With a programme of significant reform ahead, this will help schemes, providers and advisers plan effectively and focus on delivering good outcomes for savers.
It’s encouraging that the government has recognised the complexities involved in delivering the new Value For Money framework, as well as the Guided Retirement proposals, and set out a more pragmatic approach for introducing these important reforms. The revised implementation timetable gives the industry, policymakers, and regulators more time to work together to get the detail right and ensure consumers receive the support they need to make informed retirement decisions.
These changes are being introduced when a number of other major reforms are already in the pipeline, including changes to the inheritance tax treatment of pensions next year, the rise in the minimum pension age in 2028 and the salary sacrifice cap in 2029.
As the industry works through this substantial programme of reform, we would encourage the government to avoid introducing further changes to private pensions, enabling providers to focus on implementing existing reforms effectively and helping savers to navigate an increasingly complex retirement landscape with confidence.”
Jamie Jenkins, Director of Policy at Royal London comments on the DWP’s updated pension roadmap
“The roadmap reinforces that understanding the employer covenant remains an important part of the picture when considering the longer-term strategy for schemes particularly as the new surplus sharing override comes into force.
Trustees and employers should work together to agree surplus policies underpinned by a thorough understanding of the covenant and the risks to its longevity. This will enable a suitable package of robust safeguards to be put in place, whilst enabling all stakeholders to share in the benefit.”
Arabella Slinger, Partner and Head of Covenant at XPS Group
“We welcome the Government’s roadmap for pension reform and the clear timetable it sets out for delivering the measures in the Pension Schemes Act. Providing greater certainty on the direction and pace of change will help the industry plan effectively and continue its focus on improving outcomes for savers.
It is particularly encouraging to see the close collaboration between the DWP, Treasury, FCA, TPR and industry partners in shaping and implementing these changes. This approach will be crucial to ensuring changes are delivered successfully and in a way that works for savers.
At the heart of the roadmap is the Value for Money framework. Moving beyond a historic focus on cost alone towards a broader assessment of long-term value and savers’ outcomes is an important step in helping more people achieve a better retirement.”
James Carter, Head of Platform Policy, Fidelity International, comments on the publication of the Department for Work and Pensions’ timetable for the implementation of pension reforms
“We’re moving into the detail phase of the government’s ambitious pensions reform agenda. The Pension Schemes Act legislated for major changes to the way the market operates, in particular in relation to the number and scale of schemes in the market, the ability to compare schemes on a value for money basis and the need to offer default retirement income options.
Today’s update from DWP shares its thinking on the implementation of these initiatives, sets out a detailed timeline, and outlines how success will be measured. The detail around the scale-test and the mega-funds it will facilitate is particularly welcome. This reform could unlock tens of billions in investment, support jobs and most importantly deliver better retirements for UK savers.
“The Value for Money Framework is arguably the most advanced of the major reform initiatives and has been under consultation for some time. The update points to a gradual and phased roll-out, which is welcome given the complexity of data being collected and the need to iron out any challenges at an early stage.
In relation to Guided Retirement, the default retirement approach, the government has listed requirements for the new option which recognise that these solutions need to be simple for those who don’t want to or feel unable to weigh up complex financial decisions.
It also highlights the importance of continuing to offer people the right to exercise choice and make the most of the pension freedoms. This is a tension that providers should be able to manage in their proposition design while also taking account of the government’s other request that solutions need to ensure people don’t outlive their savings.”
Emma Furlonger, Interim Workplace Managing Director at Standard Life
“We support the Government’s focus on better DC outcomes through stronger value, governance and scale. Today’s roadmap provides welcome clarity on the journey to achieving those better outcomes, although there are a few areas of concern.
Helping savers turn pots into retirement income will be transformative. Retirement CDC may play a role in this, but more evidence is needed before wider adoption, particularly as the tied-in nature could amount to a modern form of default annuitisation but without the certainty over level of income.
On scale, the proposed definitions of MSDA and CIS look too narrow. If assessed only through a single default arrangement and a tightly defined common strategy, regulation may then miss other important sources of member benefit, including shared investment architecture, governance, partnerships and buying power across arrangements. With only a small number of major commercial providers, policymakers should engage directly to build a holistic view of scale, including net-of-fee returns for members.”
Mark Searle, Partner and Head of DC Investment at XPS Group
