Torsten Bell
Not much policy can have ambition to “chart the course to a pensions system fit for the 21st century“. That’s how Torsten Bell talks of his workplace pension work.
Here is what the charting of the next ten years looks.
This is for DC and CDC
This is for DB
The explanations of how the charts explain delivery is within the document published today (July 13th) by the DWP ; you can read and download it here.
The big things are about “decumulation”
What is here was expected with the exception of the dramatic delay to Guided Retirement which now will become “compliant” after July 2029 and after R-CDC which will come into force (as separately authorised from CDC) from April 2029.
This will mean that master trusts like WTW’s Lifesight will be able to set in play an R-CDC as promised, prior to having to put in an alternative retirement income. DC plans that don’t end in CDC will be given two years longer than expected to get a default option for members who don’t have a plan to decumulate.
Those who are proprietors of CDC will be pleased as this makes the importance of moving a little more urgent – three years is a long time to wait for decumulation only defaults.
The less important but still positive steps to consolidation
There are three areas where consolidation will take place
- The fragmentation of small DC schemes so that no DC or GPP has less in it than £25 billion but the 2035
- Contractual pension plans (principally GPPs ) will be able to consolidate into other DC plans without member consent (contractual over ride) by April 2028.
- That small pot consolidation (without consent) will happen from 2030.
The governance stuff
VFM is a hugely complex business before being launched in April 2024. There is talk of extending VFM to decumulation but there is nothing in the timeline (yet).
The key date is March 2029 and October 2028. March is when the data has to be available for analysis and October will be when analysis of it will be forthcoming. In short, we’re not holding out breath. This looks like a slow death for poor DC schemes which should have consolidated before 2028.
Fiduciary duty and investment decision making has yet to bare its teeth but launched its investigative work in March of this year and will end in a consultation in March 2027 before publishing guidance later in the year. We are not holding our breath on this either!
In conclusion
There are two big drivers which has seen changes since the Pension Schemes Act.
The first is the conversion of pot to pension (sort of) which is now looking more joined up, if rather delayed if you are looking to be defaulted from a DC scheme into something called “retirement guidance” which has some way to go before launch in the summer of 2029.
The second is consultation. Scale is driving everything but both occupational DC (including master trusts) will need to exceed £25bn by 2025. GPPs will also qualify for scale (something that was not originally anticipated – we will have to wait to see what a GPP looks like but this looks like a let-off for insurers (surprise surprise).
The losers in this are the smaller commercial DC master trusts and single employer occupational DC schemes.
More on DB and progress on superfunds, surplus and PPF to come…
The DB timeline is important too and more will follow it when we’ve digested what we’re saving into and what it will serve us as a wage in retirement. This is a calming vision of the future from LCP, I found it in their CDC promotion, but could work as well for DB and DC if we get them right and within the promised timeline.
A view of CDC from LCP.
