PLSA AC 2020: Pensions industry concerned at current level of regulation

The pensions industry is concerned at the current regulation of the UK pension system, with 71 per cent considering it to be “too burdensome”, according to research from the Pensions and Lifetime Savings Association (PLSA).

Announced at the PLSA Annual Conference 2020, The PLSA’s Facing the future survey found that 26 per cent felt current regulation was ‘about right’ and 4 per cent believed more regulation was needed.

A simplification of current rules was the most commonly suggested change (14 per cent), while 12 per cent recommended a reduction in the amount of regulation.

The Pensions Regulator’s changes to its supervisory approach was cited as the most impactful regulatory change over the next 12 months by 36 per cent of respondents, while 27 per cent cited the defined benefit (DB) funding code, 16 per cent believed it would be the alignment of RPI with CPIH and 14 per cent cited ESG rules.

However, amongst the largest scheme members, 55 per cent considered the DB funding code as the most impactful.

Over two-fifths (43 per cent) said that pension freedoms should be reformed, with 30 per cent saying this should be through the provision of better guidance and advice, while 20 per cent said it should be better regulated.

Regulatory change was considered a ‘major challenge’ over the next five years by 36 per cent of PLSA members, while 31 per cent cited the economic challenge posed by Covid-19.

A third (33 per cent) said they were concerned that Covid-19 would lead to a drop in contributions, while 10 per cent expected the pandemic to lead to lower investment returns.

However, 15 per cent of those surveyed believed the coronavirus would have no effect on pension schemes.

When asked what they saw as significant trends in the pensions industry over the next 5 years, 48 per cent of respondents highlighted the consolidation of the industry.

The second most commonly cited trend was climate change and ESG investment (36 per cent), followed by the future of DB in the public sector, and improving member engagement and contributions (both 26 per cent).

Half (50 per cent) of PLSA members were investing in technology for pension schemes or planning to do so over the next 12 months, with improving engagement the most common reason for investing in technology (42 per cent).

Nearly two-thirds (64 per cent) of respondents agreed that pension funds should be used to help tackle climate change and other ESG issues, with only 12 per cent disagreeing, although 55 per cent said pension funds should focus primarily on seeking high returns for members.

Over half (53 per cent) of those surveyed believed pensions should be encouraged to invest in infrastructure.

“Whether it is engaging with a trend towards consolidation, seeking ways of harnessing new technology to help savers understand retirement income or taking steps to deal with climate change, it is vital that workplace pension schemes face the future to drive better outcomes for savers when they reach full or semi-retirement,” commented PLSA chief executive, Julian Mund.

“Against the backdrop of uncertainty brought by the coronavirus, the changes our industry faces underscore the importance of developing good public policy to ensure we have a system which is fit to meet the challenges of the next five years and beyond.”

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