In a series of events held from 27th November to the 1st December, a sequence of polls of scheme trustees and sponsors found that there was a variance in the degree to which the reforms announced would benefit members or impact scheme strategy.
Only 24% of respondents believed members of both DB and DC schemes would benefit from the measures announced by the Chancellor on 22 November. 28% said neither DB nor DC scheme members would see any benefit, while 28% said they didn’t know. 17% said only DC members would benefit, while only 3% said only DB members would benefit.
A significant minority (28%) of respondents are now considering running their defined benefit scheme on for surplus, following the announcements that the Chancellor made which were intended to make this a more viable option as an endgame for schemes.
Research from XPS Pensions Group published earlier this year showed that running on for surplus made sense for about a fifth of schemes and could generate £100bn over 10 years to benefit members and support UK business.
Buyout remains the most popular endgame strategy, with 67% of respondents saying they would pursue that path if the Chancellor’s proposed reforms go ahead. There was limited appetite to enter into a consolidation scheme managed by the Pension Protection Fund (PPF), with only 3% of respondents identifying this as their preferred strategy if the reforms went ahead.
On the question of the proposed ‘pot for life’ proposals for DC pension savers, trustees and sponsors were evenly split on the question of whether the Government should pursue the plan, with 52% saying they should and 48% saying they shouldn’t.
Wayne Segers, Partner at XPS Pensions Group, said: “Whilst it’s not surprising that buyout remains the most popular endgame strategy for DB schemes, we are seeing more employers and trustees explore running their schemes on safely for surplus. This can have a substantial positive impact on DB members, employees’ workplace pensions and employers’ businesses.
“What we hope to see is a consultation that looks not only at appropriate funding levels and managing risk, but also how legislation and regulatory guidance can properly support trustees who are being asked to manage schemes to run on for surplus.”
Sophia Singleton, Head of DC at XPS Pensions Group, said: “The Government’s pot for life proposals will involve a radical overhaul of the relationship between employers, employees and their pensions. It’s clear from our poll that just over half of scheme sponsors and trustees believe the benefits that it would have for individuals might outweigh the cost of implementation. Our poll demonstrates that we need to have a full and proper debate involving all stakeholders and we welcome DWP’s call for evidence as a starting point for this conversation.”
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