“PSB” stands for Pension Schemes Bill

Running this headline yesterday, Professional Pensions became confused between arguments for proliferation from the House of Lords and arguments from an administrator to consolidate pensions onto a few well run administration platforms.

This article started out as an attempt by Lumera’s Peter Roos to promote the value he believes his systems bring to the UK DC market. Lumera have done it in Scandinavia and now see a chance to do it in the UK

Roos sees pressure from the legislation that demands in short time that smaller workplace pensions pack it in.

Of course there are some very good small workplace pensions using updated software. You think of Lewis investment master trust that is small but now sits on  Lumera’s latest platform. What an excellent opportunity to transfer a hodgepodge of live and legacy schemes onto a great administration platform as predicted by Peter.

“We expect to see an accelerated period of consolidation in the market as soon as the bill receives Royal Assent. Acquisition targets that have excellent data quality, scalability and underlying technology are likely to be at the top of buyers’ wish lists.

“For larger schemes, attention will soon turn to implementing the rest of the bill’s measures as ‘regulation inflation’ continues to put pressure on providers without strong underlying platform and administration systems.”

This is fine and migrating schemes onto young platforms designed for the post 2030 world makes absolute sense.  If we see the market consolidate around well run systems that deliver value, I will take a bow to the likes of Lumera.

But this is not what the article ends up being about. It wants to conflate Peter Roos’ message of simplicity  that consolidation could bring with a wild interpretation of performance promoted in parliament by the opposition.

Last month, the House of Lords proposed an amendment which would give The Pensions Regulator the ability to exempt sub-sized DC schemes from the £25bn scale requirement if they can demonstrate they offer value for money for members or deliver an innovative approach to member communication and administration.

We’ve heard what the House of Lords is after; it is arguing someone else’s argument that the Pension Regulator could have the capacity to allow small commercial schemes to continue on so long as the experts in Brighton are convinced by obscure arguments by sub-scale workplace pensions.

It said that, in making the determination for an exemption, TPR must look at areas such as net risk-adjusted investment performance; governance quality and operational capability; and whether or not the scheme benefited from integrated, pooled or cross-scheme investment arrangements.

The pooling is even more bizarre than judging by VFM, It would make DC savings schemes feeders to a few decumulation funds that pay regular income for as long as the saver is around.

The amendment also said TPR should consider the extent to which the scheme invests in a default arrangement operated by another scheme or manager meeting the scale requirement; and whether the scheme benefits from participation in a wider asset management group of substantial scale.

The arguments from another foolish House of Lords amendment is that the Pensions Regulator would become an arbitrator for sub-scale DC schemes to continue as a test ground for a range of innovations with the members being protected by a transfer in time into a “pension-like” decumulation.

There is nothing further from the argument of Peter Roos and Lumera. Lumera said the amendment concerning the scale requirements for DC schemes would be one of the key changes in legislation which needed to  be observed.

For the workplace pensioner , a few well run workplace schemes offering a pension at the other end is what they want and what they can expect. Many employers are moving away from the ever more fanciful views of workplace pensions as infinitely varied playground for the wealthy to a more basic view of workplace pensions valued for the certainty of income and pension increases that pensions delivered in the past.

I hope that workplace pensions will transfer to good administration platforms such as Lumera’s as a benefit of consolidation. I do not want or expect to see a regression into complexity as an argument for sub-scale experimentation. Keep it simple stupid.

We should focus on work and pensions as delivering good pay and good deferred pay. That means delivering to scale and keeping things simple.