Site icon AgeWage: Making your money work as hard as you do

Dutch and British pensions – step towards growing economies

henry tapper

The publication  in question is actually about Dutch relaxation of guarantees on benefits allowing pension schemes to invest more adventurously.

Mary McDougall may not yet be ready to follow her predecessor, Jo Cumbo, who has no time for replacing safeguards from regulators. Investing in defence stocks is ephemeral, Jo Cumbo sees the downside immediately.

I am in trouble for criticising the Pensions Regulator so I am pleased to read the article that worries Jo, a statement made last week which I have enjoyed reading (end of).

Here is what the Pensions Regulator has in mind.  Have they been talking with the Dutch? This is the appendix of their recent letter to Government.

Summary of TPR commitments and asks of government

1. Increasing the value of pension funds

  1. We will design the process and system for active analysis of investment performance data when available through the Value for Money Framework. This means that when the legislation is enacted we can use this analysis to set public principles which make clear our market expectations and supervisory approach towards driving growth in UK pension funds and savers pots.
  2. We will continue to use our platform and position as a regulator to support the consolidation of poorly performing schemes into a market of fewer, larger and better run schemes focused on value through our messaging and communications, as well as through the use of our regulatory powers as we expand our interaction with the smaller schemes.
  3. We will conduct a review and provide a report to government which provides sector insights, data and analysis to help DWP and HMT make a policy decision on the use of defined benefit surplus.

2. Enabling productive investment

  1. We will use our sector insights to help government understand the kinds of growth opportunities that UK pension schemes will find attractive to invest in, producing a report and sharing data and insight as appropriate.
  2. We will develop a strategy and workplan to make sure all schemes have trustees capable of considering a diversified range of investments.

3. Reducing unnecessary regulatory burden and releasing funds for investment

  1. We will review our regulatory capital reserving requirements for master trusts with a view to ensuring it is proportionate, which could unlock hundreds of millions of pounds for investment.
  2. We will review all our regulatory interventions and legislation to assess their value to make sure we are targeting interventions in a way that deliver the greatest benefit to savers and the economy, and to propose removal of unnecessary legislation.

4. Driving growth through digital and data enablement

  1. We will review and streamline our data requirements, where possible, so that schemes are asked once for information, in a clear format in the right way.
  2. We will provide government with our view on where wider data legislation could be harmonised and streamlined to benefit growth for pensions.
  3. We will set up an industry data and digital working group to develop the maturity of the pensions industry in digital, data and technology unlocking its transformative potential.

5. Supporting market innovation

  1. We will build an innovation hub to support industry in bringing new products to market with potential for growth.
  2. We will test emerging ideas with industry, where these have potential to benefit savers and the economy.

Our asks of government

  1. Your commitment to support us to remove unnecessary legislation once we have completed our review.
  2. Consideration of delegated rule-making powers.
  3. Convening a wider cross-government investment growth group as part of its industrial strategy.

Stepping together towards growth

Let us not lose track of where the Dutch are coming from and where they are going, this from the FT and the article quoted above.

In 2023, Dutch senators passed a law to transition the country’s occupational pension system into a model in which pension funds no longer guarantee a fixed retirement income to members.

The transition is expected to take place between 2025 and 2028. The old defined benefit system pushed the schemes into liquid, low-risk assets such as government bonds by requiring pension funds to closely match assets with long-term pensions owed.

The funds will now be able to set target returns that can fluctuate with market movements, removing some liability driven constraints and increasing their risk appetite.

Jo Cumbo will not be the only influential critic of this. We are likely to see a lot more as Britain faces problems.

Exit mobile version