Experts across different sectors of the UK pensions industry have called on the government for further consistency and clarity when it comes to pensions policy.
Speaking at the PLSA's annual conference this week, Nest’s director of strategy and corporate affairs, Zoe Alexander, said there is an “urgency to address the small pots problem” within her committee.
She said the problem adds to the younger generation’s “financial anxiety, sense of confusion and powerlessness”.
Alexander believes the default consolidator approach is currently the “best place to start, given the general state of the industry at large”.
“Given we know where a lot of the small pots are, moving them between a series of small consolidators gives us a better chance of retaining value for money in those schemes”.
Alexander noted that “virtuous circle” is possible, where the regulatory bar to become a consolidator is set high and then scale can be built within these schemes.
This will then provide members with access to “better investment opportunities, potentially more illiquids and better ability to drive down admin costs”.
LCP’s head of DC pensions Laura Myres believes “its less of an impact for DC schemes as it is particularly for some of the very large auto-enrolment master trusts”.
“I think we were quite frustrated a number of years ago cause there is such a different landscape out there, particularly from the DC scheme perspective, we found that some were able to signpost their master trust, others were not, because of potentially interpretation of legislation”.
Myres called for the government to provide more innovation in the space, “they use the term default a lot in this consultation; it's not particularly clear what this means”.
Chief executive at Railpen John Chilman added: “It is about the size of the pot and what you do with it. DC is a great savings vehicle, but that's all it is, a savings vehicle”.
Mansion House reforms
The panel also discussed the Mansion House reforms, which Myres described as “game changing” explaining that “clients we [LCP] advise on the DC side are starting to commit to illiquid assets so we are seeing it go broader than just master trusts”.
Myers believes the schemes who did not sign up for the reforms did so because they wanted to focus on a broader range of unlisted equities, citing private credit.
She added that the fees were a concern for these schemes, as investment into these illiquids could mean having “pricier defaults”.
The LGPS have been investing in the private markets for many years, according to Neil Mason, LGPS senior officer at Surrey County Council, who said: “I'm not sure what the government means by ‘UK growth assets’, I know what we mean by it, 20 per cent to private markets”.
Mason added: “We have some concerns about policy driving good asset allocation decisions”.
Robert Orr, head of technical and communications at SAUL Trustee Company, said when talking about the possibility of a change in political rule “hopefully in the longer term we will have consistency of the pensions minister, and consistency of policy”.
Myres added to calls for clarity, saying “constantly changing regulations” can lead to members losing trust in the industry.
“We do need some consistent regulation and not be worried about the regulations being torn up”.
Alexander called for more thought out policy relating to members’ best interests across the whole pensions system, saying “since the days of pensions commission things have built and we had freedom of choice and we’ve had lots of add on reforms since then”.
Alexander went on to advocate for a standing pensions commission which reviews the landscape every few years.
Calum Kapoor is a reporter for MandateWire Europe
