James Carter, Head of Platform Policy, Fidelity International, comments on the release of the Pension Schemes Bill and how he beleives, this will define the governments legacy for pension members:
“This Pension Schemes Bill will define what the Government achieves for pension scheme members in this parliament. It represents an important step forward for a wide-ranging package of pension policies, but for many of them much work is still ahead to bring them to reality.”
Directing investment allocations
Directing investment allocations risks not maintaining a primary focus on pension members’ outcomes. Fidelity International has a strong conviction in the merits of investing in private markets to support better outcomes for pension scheme members. For our defined contribution clients and members, whose investment horizon is measured in decades not years, we believe there is strong alignment in objectives of private market assets and member objectives.
However, we continue to believe that pension schemes must be allowed to direct pension assets in members’ best interests, without a mandatory requirement to invest in specific markets or assets. Whilst the Government acknowledges progress being made by industry to invest in productive finance assets, the reservation of a power to direct pension scheme investments in the future remains a concern for Fidelity.”
Scale and consolidation
We believe pension scheme members’ assets should be invested through schemes that are structured to provide value for money, and lead to the best outcomes possible with a focus on net of cost investment returns. The historic focus on cost rather than longer-term value and outcomes has constrained innovation. Provisions in the Pension Schemes Bill to bring forward the new value for money framework are extremely welcome as this policy helps form the foundation of everything the Government is seeking to achieve
Facilitating the consolidation of pensions schemes is important and we appreciate the Government’s commitment to policies that facilitate the effective and orderly consolidation of schemes, enabling firms to easily transfer pension assets from underperforming schemes. It is important that firms are able to act decisively and quickly when better outcomes can be achieved by consolidating assets into a different pension scheme.
We look forward to working with the Government to fully define the requirement to achieve a scale of £25bn in default arrangements. The more detailed secondary legislation needs to successfully ensure recognition of the potential for effective scale to be achieved by connected schemes using a common investment strategy designed and implemented on a provider’s platform.”
Guided retirement options
Deciding how to use pension benefits is arguably the most complex but one of the most important financial decisions facing members of pensions schemes, often genuinely engaging with their pensions for the first time when looking to draw benefits. Pension scheme trustees are best placed to determine what the general needs of their typical member are, but a default retirement solution can never provide for the wide variety of different circumstances and needs of individual members.
We do encourage the Government to quickly initiate the introduction of parallel requirements in workplace personal pension schemes so consumers have consistent opportunities and experiences regardless of the type of scheme they are in.
Whilst a default solution may help a member avoid a poor outcome, we have to continue to strive to engage members before and through retirement and support them to make active decisions about drawing their benefits. We believe that the FCA’s targeted support proposals offer a fantastic opportunity to offer greater assistance to members as they face these important decisions and help them make better choices. We look forward to continuing our engagement with the FCA on how to shape the targeted support regime through the forthcoming consultation.”
