The higher burdens have increased governance costs by over 5% in the last year alone. Despite this, political indecision on DB consolidation is hampering commercial decision-making. Industry support for DB consolidation remains strong, but it is being damaged by slow political decision making. The converse is true for DC schemes, where half of schemes are not exploring options to consolidate, despite the regulatory pressures to do so.
Preparation for pension dashboards is improving, but worryingly slow given their planned launch in 2023. Only half of schemes have begun cleaning up their data in preparation for dashboards. Half of respondents think that the first dashboards should be limited to basic information only.
Key findings in this initial report are:
As a result of additional regulatory requirements 76% of employers say they expect more trustees will consider resigning due to the scale of the new responsibilities they are expected to take on. 88% say they expect more schemes will struggle to find individuals prepared to take on trustee roles.
19% say they are considering sole trusteeship to simplify governance – 7% having taken this decision in the last 2 years.
Over half (57%) expect governance costs to increase by over 5% per annum.
Only 51% of scheme trustees/governing bodies say they have taken action to clean up pensions data in preparation for pension dashboards. The same narrow majority support dashboards being launched with just basic details.
58% say the delay in progressing legislation and regulation to enable consolidation of defined benefit (DB) arrangements is hampering decision-making, with support for the concept declining by a fifth in the last 12-month. Those ‘undecided’ have grown to over a third, with over 69% expressing concerns about potential reputational risks.
Whilst over a third of employers say they have already adopted a DC Master Trust or made DC consolidation decisions, over a half – 53% - are not exploring DC consolidation and say they are unlikely to do so.
Commenting on the findings, Patrick Bloomfield, Chair of the ACA, said: “The pensions industry is creaking under the weight of too much legislative change being pushed through at the same time. A widescale capacity crunch is already happening and set to get worse as Dashboards, GMP equalisation, simple statements, scam prevention and climate change are all competing for space, alongside fundamental changes to DB funding regulation and DC value for money.
“The pace of change in pensions is pushing up costs and discouraging people from being trustees. Unless steps are taken to manage the pressures being put on schemes, we risk killing off the UK’s traditional model of trusteeship. This would all but remove the member representation in trustee boards, which was seen as such as positive step forwards 25 years ago, following the Maxwell scandal.
“Brexit and Covid-19 have caused understandable delays in getting many pension policy issues over the line. We desperately need the government to focus on getting longstanding matters completed and implemented, before adding more things to the pensions to-do-list.”
Further reports on the 2021 Pension trends survey’s findings are due to be published over the next two months and a final report early in the New Year.
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