Four in five (80 per cent) businesses currently offering a defined contribution (DC) pension scheme anticipate changing their provision type in the coming years, research by LawDeb Pensions has revealed.

The research, which included businesses with DC schemes (representing 57 per cent of all the businesses surveyed), found a clear trend towards consolidation and specialised management.

Nearly two-thirds (63 per cent) of these businesses expect to transition to either a master trust (41 per cent) or an own trust (22 per cent).

Meanwhile, 16 per cent of respondents said they foresee a move to a group personal pension and 1 per cent are considering a return to a defined benefit (DB) scheme.

The research found that despite the “strong” impetus for change, 20 per cent of businesses indicated they would maintain their current arrangements.

In terms of the decision to re-evaluate DC provisions, LawDeb Pensions stated that this was a multifaceted issue, with several key factors driving businesses to change their approach.

The research showed that securing value for money was the most significant driver of change, with 50 per cent of firms identifying improved value as their primary motivation.

This is followed by the need for strong and robust management, evidenced by 41 per cent of respondents looking to make changes to ensure a higher quality of governance.

The research also highlighted the role that the ever-evolving regulatory environment is playing in prompting businesses to reassess their schemes, with over a third (37 per cent) of those with DC schemes expecting to make changes as a result.

There were other notable factors influencing this decision, including cost (34 per cent), the pursuit of best practice (33 per cent), the range of investment options (28 per cent), and the quality of member communications (28 per cent).

The research also showed that government policy, such as the Mansion House reform, is also impacting 26 per cent of businesses, highlighting the broader economic and political influences on pension planning.

However, LawDeb Pensions suggested that inertia may also be in play for one in five (20 per cent) businesses who attributed their current provision to being what they are familiar with. 

LawDeb Pensions trustee director and head of DC, Elizabeth Hartree, commented: “Our research highlights the proactive steps many UK businesses are currently taking to enhance their DC offerings and better serve their members' needs. 

“On top of this, firms are having to navigate an increasingly complex financial and regulatory landscape.”

Hartree said that upcoming changes, such as the Pensions Schemes Bill and measures to introduce Targeted Support, will have a “seismic effect” on the DC market.

She noted that while it could deliver “positive, member-focused outcomes”, it will require “serious” consideration from any business with a DC arrangement.

“It’s clear that businesses are already anticipating widespread changes, but trustees must also ensure that they focus on delivering improved outcomes in the face of a rapidly changing market,” she added.

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