There are a range of headlines about what the changes of the timeline to the Pension Schemes Act Timeline and what surrounds it. For the asset managers and those who manage commercial workplace pensions it is about “scale” and what scale does to their business
IPE go for it all being about scale and the £25bn minimum for a GPP or occupational scheme by 2035. The concept of a personal pension being scaled to £25bn seems odd but the insurance industry has twisted arms so we now see GPPs as an aggregation of everything an insurer has underwritten since personal pensions were introduced , nearly 40 years ago. It’s a funny way to get to scale and will take the use of “override” to turn personal responsibility into “default retirement income! I feel for the smaller master trusts who had thought to be seen as aggregators and will now find no way forward but to be consolidated.
Corporate Adviser go on about the strain of Value For Money reporting on DC pensions schemes. The Government has got itself in a mess about VFM. It has TPR and FCA working together to get their respective occupational and personal pension schemes to scale. This is supposed to be by spotting the winners but looks like driving small schemes to consolidation rather than jumping the VFM reporting hoots they face.
Pension Age see the issue of VFM as so critical its headline has turned red. VFM has turned into such a monster that it is being rolled out as if it were another auto-enrolment. But of course it isn’t as no one sees the gain and (with the exception of the very biggest such as People’s and Patrick Heath Lay), no one sees VFM as anything but a threat.
Professional Pensions are more upbeat , I suspect that it’s because most things had been pushed back, especially the guided retirement requirements. Here’s the voice of the ABI, always a wolf in lamb’s clothing. This time praising its lobbying for delaying progress.
Aegon head of pensions Kate Smith said the roadmap provides the industry with “much needed clarity” around timescales and the sequencing of changes, as well as “an element of certainty in a time of political change”.
She said: “We’re pleased that the government has listened to the pension industry’s concerns about such a crowded pension reform agenda, the sequencing of the various initiatives, and the impact of implementation resource challenges. We’re pleased that the minister has accepted the need for a ‘test’ period for implementation of the VfM framework. However, the full launch timeline has not been put back as we had hoped.
Of course the big win for those with GPPs and DC mastertrusts they wish to progress as “accumulation only” is that the introduction of default retirement income has been kicked back a couple of years , to arrive after the launch of Retirement CDC. Retirement CDC is not in the Pension Schemes Act but is being treated as an extension of the choice of scaling occupational funds. I do think that’s a good thing – I only wish that the choice could have been a lot earlier.
CDC exempted
The other lurking presence in workplace pensions is what is rather awkwardly called UMES CDC or “whole of life CDC”. It is referred to as “workplace CDC” which is the one change that is not being pushed back.
CDC is a progressive change that is not being pushed back. That’s because it’s kicking off in three weeks time with the launch of the CDC code and the authorisation of workplace CDC.
CDC’s not having to worry about scale or the VFM of “pots in accumulation”. The CDC arriving NOW is being given the opportunity to be a genuine alternative to workplace DC.
It will not be possible for anyone to kick the choice of this kind of CDC down the road as within 6 months of making an application, a proprietor and trustees will be in business or turned down. This is a lesson learned from the problems that faced superfunds. We do not expect to see only one CDC option in a decade’s time , nor we expect a CDC scheme to feed an annuity!
I’d like to hear it called a “wage in retirement” as it has nothing to do with “pots” or annuities. It will need an outcomes based VFM test which the we might call ” measuring the pension”.
Of course, decumulation is easy to test so long as everything is based on how much is paid out compared with what’s paid in. CDC will need a few years before it’s VFM (or lack of it) will become obvious.
