Key speechesEvolving our approach in a changing pensions landscape
Published: PMI News, August 2009
The UK pensions landscape is always evolving and there has been a long-term shift from DB to DC provision. This movement has been accelerated by the detrimental effect of the downturn as well as by the impact of long-term rising longevity costs on employers. This changes show the need for our bespoke and flexible regulatory approach.
We understand the pressures trustees and employers face and we are determined to ensure proper and responsible management such as in the undertaking of risk transfers. And to support this, we have recently published new guidance and a code of practice for trustees, advisers and sponsors regarding the responsible management of risk transfers.
Other recent work by us on DB includes the launch of a new module in the Trustee toolkit on buy-ins and partial buy outs.
We believe these are some of the right steps to both enable innovative risk management and to protect member benefits in DB pensions.
DC schemes
But trustees, employers and advisers can also be assured that we also remain focused on the long-term trends of the ever-growing and evolving DC market.
We currently provide support for DC trustees, providers, advisers and employers through the DC modules in the Trustee toolkit as well as guidance on member communications and retirement options. You can expect to see an increase in our DC support over the next few months.
We also recognise that the risks facing DC schemes are different, not least because the member has more responsibility over the final outcome of their pension pot.
One of our statutory objectives is to support best practice and administration in all occupational pension schemes and our work in the next few months will seek to improve pre-retirement processes, governance and engagement by employers.
It is important that members are kept informed of the status of their investments and their options in all pension schemes.
And it is essential that DC schemes ensure that trustees, providers and employers - who are all responsible for supplying the information that members need - are all doing their best to help members retiring today make the right choices.
To do this we believe that all must be more engaged with their arrangements for pension provision. We aim to make it as easy as possible for employers to engage and to take an active role in providing for their employees.
The role of the employer involvement with pensions will increase in the approach to 2012 and we will provide support for employers as their responsibility changes.
As part of this work we are carrying out a survey of the information provided to members in the six months before retirement. This will help us to establish a better picture of current practice and enable us to offer further guidance. We will also be highlighting the statutory requirement to offer all options, including the Open Market Option, to ensure best value for annuity purchase.
Governance
Good governance is more, not less, important in the current economic conditions and is at the heart of a well-run pension scheme. The value of robust governance processes in reducing scheme risk can be seen across the DB, DC, trust-based and contract-based market. It helps to keep costs to a minimum and ensure schemes run efficiently, with members benefits properly managed and protected.
What can you expect from us?
We are publishing our first analysis of the DC landscape in July. This builds on work done over the past 3 years analysing the risks facing DC schemes and complements the Purple Book, which gives a snapshot of the DB landscape.
This analysis has also looked at the size of the DC market. There are now 5,800 occupational DC trust-based schemes with 12 or more members and over 50 per cent of members are deferred. This shows that many DC schemes see a high throughput of members and highlights the effort that trustees must put into ensuring that all members are treated equally and are fully informed of their situation and options.
We will be publishing a number of further materials during the year, including leaflets on retirement choices and promoting pensions. We will also be updating and highlighting the information for DC schemes on our website, including the DC Question & Answers andguidance on voluntary employer engagement.
It is important for the approach of the regulator to continue evolving as the landscape changes and we will continue to monitor the long-term trends in DB and DC, looking now to 2012 and beyond. As the landscape changes, we will remain focused on educating those involved with pension schemes and increase engagement in pension provision.