According to some old conference notes, this joke was made by Geof Pearson almost ten years ago.
The precipitous plunge into DC is now reality. 2010 is likely to be a tipping point for many workplace pension schemes. Here are my personal predictions for the year ahead.
1.Increased demand for integrated workplace savings vehicles among larger employers. Capacity will continue to lag the demand for portals which allow members to transfer wealth between share-save schemes, ISAs and approved pensions.
2. DC fiduciaries will concentrate on the volatility of their defaults looking for ways to provide lower volatility alternatives using more diversified strategies. Pricing pressures will limit the use of alpha generating strategies.
3.The impact of EU Solvency II on annuities will drive innovation in the de-accumulation phase. The industry will put pressure on the Treasury for “SolvencyII friendly” solutions.
4. The DC governance budget will continue to come under pressure and we will see more large unbundled DC schemes (like Logica) looking for contract based solutions such as GPPs and ISAs. Insurers will continue to pick up market share.
5. PADA will continue to prepare for Personal Accounts, hoping they have sufficient momentum to guide the project past the formation of a new Government.
6. We will see more Mastertrusts looking to bridge the gap between the low-level governance of contract-based schemes and the high cost governance of traditional occupational DC models
7. Capital flows into DC sill surge as ETVs pump money out of DB and into super low-cost DC plans
8. The fundamental costs of DC will continue to fall as providers consolidate, adopt greater STP and use leverage to drive down fund costs. This will be accelerated by pressure from Personal Accounts and greater competition in the passive market (Vanguard)
9.The DWP will continue to put pressure on insurers running contract based plans to smarten up their fund governance, especially their default funds.
10.The DC industry will wake up to the opportunities of social media to pass information to members though the impact won’t be felt for a couple of years