Commenting on what is top of his Christmas pension wish list and the year ahead, Paul Waters, Head of DC Markets, Hymans Robertson, says: “Top of my wish list for 2025 is that stage two of the Government’s Pensions Review will deliver a coherent long-term plan for addressing UK retirement savings adequacy. Ideally, this will include future state pension provision and will work for all members of society. Collective DC will feature prominently in 2025 and we are optimistic about the role this can play. DC savers need help with a secure lifetime retirement income and CDC provides this. For it to thrive, a flexible design framework that allows schemes to support the needs of different groups is needed. ‘Decumulation only CDC’ should closely follow the multi-employer model.
“The megafunds pension consolidation regime, as outlined at the Mansion House Speech, should enable the industry to help members in legacy low value schemes move to modern, better performing arrangements. It's important that the minimum size scheme from the Mansion House announcements is not set too high, ensuring that innovation and creativity can remain a key feature from smaller more nimble market participants. A competitive pension market with a strong incentive for providers to innovate is essential to the success of any megafund regime. “My final wish for next year, and beyond, is that “employer duty” is implemented in such a way that employers have a legal obligation to review their pension scheme on a periodic basis. Such a system would maintain a competitive market and help ensure that savers get the best value on an ongoing basis.”
Calum Cooper, Head of Pensions Policy Innovation, Hymans Robertson, says: The biggest problem facing the pensions industry this year remains inadequacy. A generation who don't have enough to live independently, and with dignity, in their later life is deeply disappointing. Tackling this problem in the aftermath of an affordability crisis, with limited fiscal headroom and high national debt is a tough place to start. So, it’s a huge credit to the Government for prioritising this as we head into 2025.
“2024 has provided some glimmers of hope. The first UK CDC scheme was launched: an early sign of the pendulum swinging back from individual to collective savings to deliver higher pensions for the same spend. Clara, the UK’s first superfund, has improved outcomes for tens of thousands of former employees of Debenhams and Sears. And, the cost of providing a pension for life has fallen by 50 percentage points since the start of 2022. Add in a new Government that has made pensions a key feature of the Kings Speech, the Budget and the Mansion House Speech: signal that pathways to adequacy are now possible. If we could be granted three wishes in 2025, my first would be for the Pensions Minister, Emma Reynolds, to make it easier for Defined Benefit (DB) pension schemes to deliver more. At over £1trn it’s too big to economically ignore. By making surplus sharing easier, the government could unlock tens of billions of pounds in extra productive finance to help grow the UK economy, whilst improving pensions too.
“My second wish is for a commitment to clear pathways to adequate pensions for employers, employees, and the self-employed. The basis for this is Phase 2 of the Government Pensions Review which will begin in earnest. This is a big job as adequacy must be considered, in tandem, as part of plans for the state pension and means tested benefits.
“Finally, my third wish. I hope that next year will bring an industry and government push to reenergise collective savings. This could be through the next generation of CDC designs, via decumulation solutions that pool risk. It could also be achieved through more conditional flexibility in DB benefits that can be offered to help current and future open DB schemes to thrive. The overarching goal is that we need to harness the power of the collective to deliver better pensions for any given spend.”
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