Personal Pension  

Dalriada predicts 2016 ‘flurry of activity’ for DB schemes

Dalriada predicts 2016 ‘flurry of activity’ for DB schemes

There will be a “flurry of activity” for defined benefit schemes post the European ‘in/out’ referendum as they are squeezed to implement the Institutions for Occupational Retirement Provision II directive, according to Dalriada Trustees director Adrian Kennett.

Speaking at an event held in London this morning (28 May), he predicted that the EU referendum is scheduled for early to mid 2016, which many informed commentators are stating. However, the IORP directive is not meant to be implemented until towards the end of 2016.

Yesterday (27 May), the Queen’s speech said that early legislation is set to be introduced for an ‘in-out’ referendum on European membership before the end of 2017.

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Mr Kennett said: “If you look at the general direction of travel of what has been going on in UK pensions in the last two to three years, we are ahead of the curve when it comes to what is coming from Europe and IORP II.

“We might see a flurry of activity towards the tail end of 2016 when the result of the referendum is known and the implementation of IORP II is brought about - in the same way that you’ve seen a flurry in the last 12 months around DC flexibility.”

He added that IORP II is formed of three main pillars: governance, communication and funding.

“You go back to those three pillars - what we are going to need to see is how the government will want to implement that framework over the UK.”

Mr Kennett said what would be needed is to look at the requirements for benefit statements, accounting and disclosure. He added that aspects of DC governance, such as selection of investments and default funds, clarity in terms of expenses and the number of trustee meetings, would have to be included.

“All of that stuff I think we can expect to see brought into the DB universe in a hurry at the tail end of next year, so if you go to the requirements for everything that’s in a DC statement and rattle that off, that is what I think will becoming into the DB universe in that period.”

Elsewhere, Mr Kennett said that he did not expect to see collective defined contribution plans come to fruition under the new pensions minister, Ros Altmann.

CDCs pensions, which were legislated in June last year, have been widely touted as a potential saviour of more secure income at a time when final salary pensions are in decline.

Under the CDC model, contributions are not retained in an individual fund for each member but are pooled. When a member retires the income is paid from the asset pool rather than through the selection of an individual retirement income product.

Mr Kennett said: “I think that was Steve Webb’s proposal - it wasn’t grasped by anyone at the time really. It was a strong theoretical idea, but I think with everything else that was going on I don’t think CDC is going to be at the forefront of the new pensions ministers agenda.