TISA welcomes the direction of travel, but highlights the importance of getting the details right to ensure the Pension Schemes Bill delivers improved outcomes for consumers
In a comprehensive response to the Public Bill Committee’s Call for Evidence (CfE) relating to the Pension Schemes Bill Part 2, The Investing and Saving Alliance (TISA), whilst broadly supportive of the direction of travel, has highlighted a number of key concerns and is urging the Government to rethink parts of its approach.
In summary, TISA are concerned that:
- Whilst it’s to be expected that Default Pension Benefit Solutions (DBPS), by their very nature, will largely produce suboptimal outcomes for many of the consumers affected, there needs to be more emphasis in the Bill on measures to ensure that:
- They don’t produce disastrous outcomes for anyone. For example, there cannot be a situation in which the default offered is an irreversible option, such as an annuity, as there will inevitably be examples of this being a totally inappropriate offering to someone who may, for example, have only a short life expectancy.
- That any such scheme has the flexibility to allow the consumer, should they become engaged further down the line, to change away from the default.
- The scale requirements being placed on schemes could easily lead to a market dominated by just a few ‘mega’ schemes to the detriment of competition, innovation, consumer choice and outcomes.
- The overall and eventual success of the Bill could be jeopardised if the high level of complexity in the Bill is not matched by a commensurate high level of engagement with industry.
Expanding on their concerns, Renny Biggins, Head of Retirement at TISA, said,
‘It’s vital that this landmark piece of legislation delivers the improved outcomes for the consumer and the sector we all seek. We very much appreciate the constructive way that Government is moving forward with this agenda and are hopeful they will take our concerns into account.
It’s imperative that all DPBS offerings are obliged to have a degree of flexibility built in, so that consumers can, if they wish, engage and benefit from a different solution.
We understand the need for scale as a means of reducing overall administration costs and the provision of a more compelling proposition. However, applying the scale requirements in an indiscriminate way to smaller multi-employer schemes can have the perverse outcome that even those performing very well under the Value for Money (VfM) criteria face being wound up, whereas single-employer schemes performing average against VfM are left alone. Therefore, we are urging the Government to take a more holistic and nuanced view of how to apply the scale criteria to smaller multi-employer schemes. Our additional concern in this area is that by squeezing out the smaller multi-employer schemes, we risk the creation of a market dominated by a few very large providers, which would reduce competition/innovation and remove the nuanced choices employers currently have.
TISA are very appreciative of the consultative and collaborative approach being taken by Government in these complex and detailed matters. However, due to the number and complexity of the Bill they emphasise the need for this approach to be ongoing.’
Renny added, ‘This Bill contains a very high number of measures that address complex areas in which getting the detail right is absolutely crucial. Continued close and consultative working between all stakeholders will be required to ensure that the pacing and sequencing of the measures proposed are done in such a way to increase the chance of success rather than hinder it.’
Ends
Notes to editors:
- TISA is a not-for-profit membership organisation committed to improving the financial wellbeing of all UK consumers by working collectively with the financial services industry to deliver solutions and champion innovation, for the benefit of people, our industry, and the nation.
- TISA has approximately 270 member firms involved in the supply and distribution of savings and investment products and associated services. Members include the UK’s major investment managers, retail banks, online platforms, insurance companies, pension providers, distributors, building societies, wealth managers, third party administrators, FinTechs, financial consultants, financial advisers, industry infrastructure providers and stockbrokers.