Commenting on her hopes for 2020, Susan McIlvogue, Head of DB Pensions, Hymans Robertson says: “We’re looking forward to the reintroduction of the Pensions Bill early in 2020. The bill will lay strong foundations for a clearer, more directive DB funding regime and give the Pensions Regulator (TPR) a broader arsenal of powers to hold schemes to account. TPR has previewed the new DB Funding Code for much of 2019 and we’re now keen for industry consultation to start so that detail and consensus can replace the current state of uncertainty and speculation. We’d also like to see an authorisation regime for commercial consolidators which was disappointingly missing from the draft Pensions Bill in 2019. The continuing absence of an authorisation regime for commercial consolidators is stalling some transactions that might improve security for members.”
“We’d also like to see the Government remove some of the obstacles and uncertainty around GMP equalisation in the coming year. This could include providing HMRC with adequate resources to provide necessary data to pension schemes, clarifying the tax position for different GMP equalisation options and reviewing the regulation around GMP conversion to help streamline that process. The planned consultation on the cessation and replacement of RPI is another item on our wish list for 2020, bringing certainty on the timescales for aligning RPI with CPIH. This change has wide ranging implications for pension schemes, including pension increases due to members, so progress and clarity are important.”
Commenting on their hopes for the coming year the world of DC pensions, Michael Ambery, Head of DC provider relations says: “I’d love to see the government make a thorough review of the current, very complicated pensions tax system. It simply doesn’t work and isn’t rewarding the right behaviours. We were glad to see a pledge after the election to urgently review the complex taper affecting doctor’s pensions, however the problem is far broader than that. So, in 2020 I’d like the government to take action to completely demystify the complexity surrounding tax relief. In particular it would be great to see a full commitment to simplifying the issue of annual allowance that is in reality preventing key workers from putting in more hours due to tax penalties.”
“I’m looking forward to seeing the development of the pensions dashboard and also would love to see further government, and industry, backing and support for the PLSA’s Retirement Living Standards and recognition of broader saving beyond pension in due course. We know from our experience with our Guided Outcomes technology that giving people targets for retirement savings really works and encourages greater focus. Adoption of these targets should go a long way in ensuring better retirement incomes across the workforce. I also hope that 2020 is the year where there is a commitment to extending auto enrolment to the UK’s 5 million self-employed workers.”
Commenting on three main investment issues facing DB scheme trustees in 2020, Elaine Torry, Co-head of Trustee DB Investment, Hymans Robertson says: “Following the publication of the CMA report in 2019 and the subsequent release of the regulations, the industry will be looking at how to effectively measure their advisors against the objectives set. Our wish for 2020, is that trustees focus on the intent of the regulations, keeping sight of their long term strategic objective, and ultimately improving the value for money that trustees are getting for their members; treating the regulations as a compliance exercise will result in wasted governance time without receiving any tangible benefits.”
“Central bank accommodation helped propel markets higher in 2019. With low and negative rates likely to remain a key tool for central banks and an equity rally of 2019’s scale unlikely to be repeated in 2020, our wish for 2020 is that trustees develop a robust risk management plan, which sees them only taking risks that can be afforded and that are rewarded, and essentially keep them on track to achieving their long term objective.”
“The consultation for the proposed alignment of RPI towards CPI is set to take place in early 2020 and whilst the rationale for the change is understood by many, the impact on trustee DB funding positions could be wide ranging, with some experiencing a funding loss whilst others could benefit. Our wish for 2020 is that trustees consider the extent of the possible impact of any realignment that is introduced (if they haven’t done so already), and explore courses of action that could be taken to help reduce its impact on funding positions.”
Sharon Bellingham, senior consultant at Hymans Robertson reviews the next year’s priorities for providers: “As another year passes the Net Pay / Relief At Source anomaly still rumbles on. It’s disappointing that no visible progress is being made to find a fair and equitable solution for the low earners who miss out on valuable tax relief through no fault of their own. The Conservative Manifesto included a pledge to “conduct a comprehensive review” of this issue so let’s hope there’s an announcement in the Spring Budget and they do follow through as they’ve promised.
“Many will cite 2019 as being the year of the master trust but I’d argue that the majority of the last decade has been about master trusts – from infancy to material growth, we confidently enter the 2020s with a buoyant and competitive market. It’s clear that the Master Trust market has undergone substantial change in a relatively short period and it’s also clear to see that there’s more to come. In what seems like a blink of an eye, numbers have more than halved and we can absolutely expect further market consolidation, albeit at a slower pace. Five years from where we are now, I think it would be reasonable to expect a market of around 20 commercial master trusts.
“Developing the Simpler Annual Statement provides a great opportunity to keep pension statements out of the kitchen drawer. The market has so far been divided on their adoption but it’s difficult to argue against the need for simplicity, standardisation and generally allowing common sense to prevail. It’s clear that providers need to spend time and money to ensure that they can meet the standardised format and the pace of adoption has so far been collectively slow. We are expecting to hear more from DWP during 2020 and it will be interesting to see whether the government will mandate as a consequence of lack of progress.
“With the introduction of Investment Pathways fast approaching, it will be a busy first half of the year for providers who offer non-advised drawdown; providers only have until August to design and launch these four, objective-driven, ready-made decumulation investment solutions. Pathways will also influence and shape the wider market. It may have been billed as a matter for the non-advised, contract based world but the ripple effect will quickly cascade across the wider DC landscape.”
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