Michael Ambery, Partner, Hymans Robertson says: “We welcome this forward-looking consultation from the DWP focusing on the future of defined contribution schemes. We believe that consolidation, if approached with individual member needs at the heart, can lead to better long-term retirement outcomes. Although this is a direction of travel we support, there is the risk that too quick a transition will not lead to better outcomes because we’ll lose some inability to learn from innovation. Additionally, many schemes up to £5bn in size may feel that they can demonstrate better governance credentials than some consolidators and the associated costs of too quick a transition could have a detrimental impact on member outcomes. Some frameworks are under-developed and focus to heavily on absolute costs and charges and not on overall member outcomes (e.g. assessing fees for private markets investments). Overall, we feel there is still a lot of work to be done to create a truly leading environment for consolidators to thrive in, and ultimately deliver better outcomes for members.”
Susan Waites, Partner, Hymans Robertson commented: “For what the government terms hybrid schemes (ie schemes with DB - often closed - and DC sections) the biggest barriers are often the government’s own tax rules. Moving DC assets out for members who also have DB is considered a partial transfer which results in the loss of protected cash - more than 25% - and ability to take benefits before current minimum pension age (the latter will get worse if minimum pension age increases as planned). Where members have such protections it’s often difficult or even possible to get Trustees to transfer assets without the members consent (as part of a bulk Transfer Value exercise) unless the employer is willing to compensate the member in some way. It would be helpful if the government would re-visit their own tax rules and fix this issue to benefit members.”
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