Doesn’t the pensions industry already have a very strong consensus that people should give them more of their money to manage? Political parties already seem largely on board, so I’m not sure what a commission would be expected to do except rubber stamp that. https://t.co/oJfi4kvDpS

— Prospect Pension (@ProspectPension) April 6, 2024

There is more to a Pension Commission than setting AE rates. Though you might not think so if you listen to the people calling for one.  Robert Cochrane of Scottish Widows is one of a number of insistent voices.

There needs to be more money going into pensions so that more pensions can come out. Minimum wage has gone up, benefits have gone up, tax thresholds have remained the same and the fiscal drag means some pensioners paying tax will not get much of a cost of living increase.

Hard liners see pensions as purely public and I have some sympathy with this view.

I have used this slide of Steve Webb’s before but it’s worth repeating, auto-enrolment is an AVC to the State pension, especially for women.

To suppose that we need a Pension Commission just to sort out the orange and pink pies is to miss the great grey!

And of course the weight of money in the orange pie is providing defined benefit pensions, pensions that need less rather than more funding.

One of Laura Trott’s objectives when she became pension minister was to provide greater fairness between DB pensioners and DC savers. Right now the system is stacked in favour of the DB pensioner. If VFM is outcome based, why not consider firstly the diversion of DB surpluses to DC workplace pensions and the opening of DB schemes to DC savers?

This is certainly not on the insurance industry’s agenda but it likely to command more respect from a parliament appointed commission than the ABI lobby would like to admit.

This brings us to a number of further questions , none of which will work in the insurer’s or asset manager’s favour.

The small pots problem is a master trust issue which is likely to be managed for the existing stock by the master trusts, while some master trusts are insurers, I do not see the insured master trusts benefiting from small pot consolidation. Going forward, the workplace pension market is consolidating toward master trusts and away from GPPs.

The master trusts will soon outgrow insurance platforms, pooled funds and personal pensions. In the world of £50bn + funds, direct investment , custodial platforms and professional trustees will predominate. Service provision moves towards disintermediated solutions.

Similarly with employers and small DC occupational schemes. Employers with GPPs are increasingly making the GPPs paid up and offering staff the consolidation services of master trusts. Occupational schemes are not switching to GPPs, they are looking to master trusts. A pension commission will undoubtedly focussing on the value for money agenda and that is pointing in only one direction.

As for defined benefit schemes , the current assumption is that insurers are likely to clean up. But this is based on a view that corporate DB schemes will buy in bulk annuities or buy-out with the same. This is not in line with the aspirations of the Mansion House Reforms and it pre-supposes that employers and trustees are prepared to pay a 20% premium to get rid of what is increasing considered an asset.

And let us not to forget that the vast bulk of occupational pensions payable in the UK have nothing to do with insurers or asset managers. The unfunded public sector schemes are a matter of public interest and of the pension commission’s interest but of no interest to the insurers and asset managers at all.

The direction of travel is in the opposite direction of Scottish Widows and those asset-managers for whom workplace , non-workplace personal pensions and annuities are the primary areas of growth. The market price of UK insurers has lagged even UK stock markets, the markets know. A Pension Commission has little to offer the insurers, much as they may feel they will benefit from its activities.

If I was an insurer, I would be keeping my head down right now. Substantial change in the way our pension system works would not work for them. Tinkering with what we’ve got, the current (non) policy, is probably the insurer’s best option.