The minister for pensions and financial inclusion has unveiled plans to force the consolidation of sub-scale defined contribution arrangements.
In a speech delivered at the Pensions and Lifetime Savings Association's (PLSA) Edinburgh investment conference yesterday (March 12), Guy Opperman said a future where a select number of providers will have multi-billion pound portfolios will offer better collective bargaining power.
He specifically name-checked small self-administered schemes, now known as relevant small schemes by the Pensions Regulator.
TPR has found 27,760 schemes with fewer than 12 members, of which 79 per cent identified themselves as a relevant small scheme.
"Improved scale and improved choice will drive better returns," Mr Opperman said, contrasting this goal against the "thousands of occupational DC schemes where members are themselves the trustees", with "little more power than retail investors".
The minister continued: "I'm looking forward to bringing forward regulations for consultation in the spring to nudge these schemes towards consolidation, and be in no doubt that consolidation is what we're going to try to do."
The minister hoped that this consolidation will lead to more sophisticated and better value default investment strategies rolling out across the industry, and said the government may make further changes to facilitate investment in "illiquid investments and certain higher-risk sectors", in line with the government's own Budget push to invest in British infrastructure.
While Mr Opperman was clear about his desire to see quick consolidation in DC, he remained non-committal on plans to facilitate the consolidation of defined benefit schemes via superfunds.
"A superfund bill would be 70 to 80 clauses at least," he said, justifying its omission from the Pension Schemes Bill.
He said he envisaged a second pensions bill appearing within the current parliament, adding that "government policy is still very much committed to superfunds".
angus.peters@ft.com
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