PLSA calls for its own regulatory regime to help us spend our pensions

The new regulatory framework results from the PLSA’s call for evidence


The Retirement Living Standards were an initiative that the PLSA should be proud of and I’m glad to see WTW’s Lifesight integrating them into its modelling tools for its savers (announced yesterday).

The difficult second album is to find a way for occupational DC schemes (including master trusts) to convert consumers from diligent savers to responsible spenders.

It’s conclusion is to call for a new regulatory regime – just for the diminishing numbers of PLSA members left running not for profit DC schemes and herein lies the problem. We suffer from a surfeit of rules but a deficit of learning making pensions a bit like the Latin textbook with answers to the questions we aren’t asking.

To get traction for its own rules, the PLSA needs to demonstrate there is a problem with the old ones as well as making a case for why occupational schemes can do things better.

The three card trick is to continue the nudging of consumers through the “Strait of Hormuz” without them even noticing that they are confronting one of the nastiest hardest problems in finance.

The economic rationale is about the growth in pot size, once there is enough money in these DC pots, (it is hoped) there is scope to pay the pots a lot more attention. Currently the annuity value of the average pot is around £1,000 a year. Seeing this double over the next twenty years does not sound like a great achievement for DC pensions. We only need the triple lock to survive a couple of parliamentary terms for it to have achieved more.

The paper asks for a new regime considered

  • To provide more support to savers who do not engage with their options – utilising the lessons from Automatic Enrolment and the Open Market Option – as well as supporting freedom and choice for those who do;
  • To facilitate and influence future product development with a view to managing the risks for savers as Defined Contribution (DC) pots grow and dependency on DC derived incomes increases;
  • To utilise the benefits of scale and mechanisms such as the trust-based fiduciary duty within Master Trusts and Trust-based schemes and the responsibilities of Independent Governance Committees (IGCs);
  • To support similar saver experiences across the market, whilst enabling innovation to flourish;
  • To mitigate or help manage some of the risks savers are facing; and
  • To mitigate some of the key risks schemes are facing – including litigation, financial and operational risks.

As with most lists, you scroll to the bottom to get to the killer point.

The issue that PLSA DC pension schemes face is that they don’t pay pensions and were they to, they would be embracing all the risks that they jettisoned by not being DB occupational pensions.

Although the PLSA paper suggests the risks arose from the introduction of pension freedoms, the risks are inherent in DC and the wholesale shift to DC predates freedoms by some 20-25 years.

The paper assumes that employers want their pension schemes to pay pensions but for the risk of that happening to be mitigated by a new regime that absolves them from blame when the proverbial hits the fan.

How the risks will be mitigated is laid out in the user journey the member takes as they enter the Strait of Hormuz, pass through it and sail away into the sunset.

There is passing mention as to how this user journey will be delivered with a nod to the Fintech community and with perhaps an intentional typo,

54. The development of rob advice and guidance (sic)

Product development (rabbits out of hats)

Meanwhile , it is hoped that proper product innovation will come to the saver’s rescue. There is , in the paper , some talk of what that innovation might be and it sounds remarkably like the Defined Ambition agenda, where Steve Webb stood in a garden of innovation watching many flowers bloom – only to see the garden turned to a parking lot when he left office.

Strangely, and I don’t understand the reasons why not, the PLSA have almost totally ignored the obvious solution to the problem of getting saved money spent

Collective Defined Contribution schemes, deferred annuities, guaranteed drawdown, and individual mortality underwriting get lumped together as “potential products that might facilitate better or more sustainable outcomes” .

But having given it an airing, CDC is returned to the box and the lid shut sharply down

Stakeholders saw potential value in decumulation-only CDC arrangements, which will not, initially, be permitted under the Government’s legislative regime.

Instead we get a new regulatory framework bookending a requirement on DC schemes to nudge members into the right options.


I can see no reason for this model to need a new regulatory framework, it is essentially an extension of the investment pathways to occupational schemes with fiduciary oversight resting with trustees rather than  IGCs and GAAs.

The DWP’s proposals for the partial demolition of the DC occupational framework (envisaged in its latest consultation on good DC outcomes) suggests that all will remain will be schemes operating under the master trust authorisation framework and a few mega employer schemes like Lloyds Banking Group’s Your Tomorrow.

These schemes are either working under a new regulatory framework of are big enough to make their own rules.



Five years on from the introduction of pension freedoms and with precious few DC schemes offering anything like a scheme pension , this looks like a last throw of the dice.

Frankly, the business case to throw a lot of regulatory resource at the decumulation of occupational DC pensions looks pretty thin. There are other options, such as getting CDC into these large schemes.

The PLSA cannot ignore the trend to consolidate. Soon it will be left with only a rump of single occupational schemes and the commercial master trusts.

This paper looks like a text book giving answers to questions we are no longer asking. The world is moving on and the solutions to the problems posed in this paper  are going to be answered elsewhere.



About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
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4 Responses to PLSA calls for its own regulatory regime to help us spend our pensions

  1. Interesting that Martyn Lewis this morning made no apology for NOT promoting RLS, saying effectively there aren’t enough hours in the day to remember all these worthy efforts by others.

    I did find the Networking Lounge discussion yesterday between 2 and 2:30 a bit of a love-in, with lots of worthy people adding to PLSA’s own self-congratulations. I’m afraid I just don’t relate to the three levels of retirement which PLSA modelled and introduced us all to last year.

    Some of the wealthier people I know are off the scale compared to the top level, and I’m also keenly aware (as Scotland’s communities tend to be more “integrated” or certainly less “segregated”) of people at the lower end, whose lives just now are a mix of fear, anger and occasional reliance on food banks and other hand outs.

    I usually object to three-level (or three-tier!) structures as there’s a tendency to settle on the middle one; even numbers of levels are better, but in fact with wealth (or the lack of it), I feel we need a lot more than three, to be reminded of those much less fortunate as well as those much too well-off.

    • henry tapper says:

      I was listening to Martyn intently and will blog about his insights tomorrow. I don’t think anyone -even experts – have RLS in their heads – it’s useful for delivering guidance and is one of very few standards we have in pensions. So I think PLSA did a good thing – though RLS isn’t going to fly on MSE anytime soon!

      As regards the tiers – who is going to be using tools? I suspect that it’s the bit in the middle – the bit that isn’t wealthy or needing pensions credit –

    • Martin T says:

      As I said in the ‘love-in’ discussion the RLS are a good start but they still leave the nasty problem of turning that ambition into action.

      Members are expected to take an RLS add housing/care costs and tax; subtract state income and other income sources; convert to the initial fund required for the required annuity/drawdown; subtract existing assets and then convert that answer into a contribution rate… But at least we have the RLS at the start of that process.

      Similarly I think the PLSA framework for decumulation is a good start.

      Many employers/schemes will not want to take the risk/cost of providing help with decumulation unless they are compelled to do so and can signpost without any risk of giving advice, accepting some new reputation risk etc. Employers / trustees can offer help but cannot issue material that promotes a particular financial product so they would be nervous about signposting to a default drawdown fund for example. I think the framework is a useful contribution to the discussion.

      I agree the decumulation problem is another factor steering many schemes towards transfer into a master trust.

      I agree CDC would be welcomed by the majority of members with modest DC pots. Many think that’s the pension they already have, they don’t realise it’s really just a tax efficient savings scheme that attracts employer contributions, but that they will have to decide how to take the money.

  2. Martin T says:

    This is an extract from a recent FCA publication quoted by Linklaters “Some employers and trustees want to give their scheme members illustrative figures that compare the outcomes a member might get if they keep a safeguarded benefit or transfer / convert it into flexible benefits. But this kind of analysis might steer a member towards a specific course of action, which is part of the regulated advice process. As a result, we consider that providing such figures could mean that firms are likely to be giving advice or an inducement.”

    This suggests that simply attaching a CETV to a DB statement might count as advice which throws into doubt what information you can currently provide without fear of reprisal. And that fear is, at least in part, behind PLSA suggesting legal change is needed.

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