TISA responds to DWP/HMT consultation: Pensions Investment Review: Unlocking the UK pensions market for growth
Renny Biggins, Head of Retirement at TISA said:
- Given the fragmented nature of the pensions landscape today, we agree that a more consolidated market will broadly generate better consumer outcomes. A key to this success is the way in which consolidation is approached and how it is achieved. The Value for Money (VfM) framework will deliver scheme consolidation through a consumer-focused approach and as such, ticks both boxes We are less clear on the primary objectives for the proposals contained in this consultation relating to default funds and arrangements which are targeted at multi-employer schemes only.
- It appears that the main driver for the latest proposals is to stimulate investment into UK Infrastructure and Private Equity. We fully understand and support this objective if it can be aligned with member outcomes, however it should be recognised that scale does not automatically translate into UK private asset investment. Economies of scale will make some asset classes easier to access but ultimately, schemes have a duty placed on them to make decisions which benefit their members and if it can be demonstrated that non-UK investments are more appropriate, they should invest in those.
- Our preferred approach to support a less fragmented multi-employer market is for schemes to be authorised to operate through a regime which requires them to submit a business plan, which outlines their strategy for continued growth and innovation. Master Trusts are already required to submit a plan which includes growth intentions, so this regime could be extended.
- The interaction between these proposals and other pipeline change should be considered and a strategic schedule for change introduced, with member outcomes placed at its centre. For instance, VfM will require firms to undertake assessments on a number of their default arrangements – which could stretch into the hundreds. However, proposals contained in this consultation seek to restrict the number of default arrangements – perhaps down to 10 or less, so there is an immediate misalignment between the two. Furthermore, Small Pot consolidation is due to feature in the Pension Schemes Bill 2025, however ‘mega[1]fund’ proposals may significantly reduce the number of multi-employer schemes operating in the future, which would, in part, solve the proliferation of small deferred pots. Schemes which may be considering becoming a default consolidator may end up consolidating themselves due to future scale requirements, so it would be logical to pause the Small Pots work, until we know what the final consolidation proposals are, which will then inform analysis on what a future DC landscape could look like in 2030.
- 2024 saw the biggest exodus from the London Stock Exchange in 15 years with 88 firms removing UK as their main listing. Pension Schemes are well placed to help the LSE recover and increase levels of investment into UK private assets but they only form one part of a wider picture. UK policies need to generate a genuine desire for firms to list in the UK and boost levels of private enterprise and national infrastructure projects, which in turn will generate investment opportunities for pension schemes.
Read more here: Unlocking-the-UK-pensions-market-for-growth-final.pdf