Majority think changes needed before DB schemes invest for surplus

Nearly three quarters (73 per cent) of pension professionals think changes are needed for the Department of Work and Pensions (DWP) to deliver on its aim for defined benefit (DB) schemes to invest for surplus, a poll from LCP has found.

In particular, the poll revealed that, of these, around 85 per cent thought that “meaningful new protections for member benefits” were essential on delivering this aim, rather than more flexibility and guidance.

However, the poll found that there was support for the government's plans to establish a public sector consolidator (PSC) by 2026, with around 25 per cent of respondents agreeing that this would be a helpful new strategic option for DB schemes, while a further 50 per cent said the PSC could benefit their scheme subject to the final details.

Despite this, eight in 10 (80 per cent) did not report any challenges with accessing insurance or commercial consolidators on competitive terms, although nearly a third of these felt that they could potentially struggle in the future.

Commenting on the findings, LCP partner, Laura Amin, said: “Our survey results indicate that many schemes are open to the idea of a Public Sector Consolidator run by the PPF as a further strategic option, but the impact this will have on the market will be highly dependent on where the final policy design lands on pricing, eligibility, and approach to standardising benefits.   

“The results of our poll are consistent with LCP’s wider experience that we are not seeing any issues with smaller pension schemes being able to access competitive pricing from commercial providers at the current time. 

“However, it is clear that the PSC has the potential to act as a valuable market stabiliser where there is the ability for pension scheme demand for insurance solutions to outstrip supply in the future.” 

“We are fully supportive of the admirable aims of the DWP’s consultation," LCP partner, Steve Hodder added.

“Removing barriers to DB schemes investing to grow surpluses can greatly benefits scheme members, sponsors, and investment in the UK.  

 “What is clear to us, however, is that for this ambitious aim to be delivered it is vital that new powerful member protections are introduced. 

“Now is the time for strong policy action, otherwise we fear the opportunity to drive a fundamental shift in the UK’s retirement system will be lost,” he concluded.

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