Four in five employers could rethink DC provision
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The majority of UK employers (80%) say they will probably change their defined contribution offering, driven by value for money and regulatory changes among others, a new survey has found.
The research was conducted for professional trustee firm Law Debenture by Censuswide among 150 finance decision makers in the UK who have input on their company’s defined benefit scheme. About 57% of these had DC schemes.
The survey identified a trend towards consolidation and specialised management, as close to two-thirds (63%) of employers expect to transition to either a master trust (41%) or an own trust (22%), while just 16% think they will move to a group personal pension. Only 1% are considering a return to DB.
“Our research highlights the proactive steps many UK businesses are currently taking to enhance their DC offerings and better serve their members' needs,” said Elizabeth Hartree, a trustee who heads up DC at LawDeb.
“On top of this, firms are having to navigate an increasingly complex financial and regulatory landscape. Upcoming changes, such as the pension schemes bill and measures to introduce targeted support, will have a seismic effect on the DC market; and while it could deliver positive, member-focused outcomes, it will require serious consideration from any business with a DC arrangement,” Hartree said.
She added: “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.”
LawDeb thinks a number of factors are making businesses change their approach, such as value for money – half (50%) of firms cited getting better value as their main driver. About two in five (41%) are seeking higher quality governance, while 37% cited the evolving regulatory environment.
Other factors influencing the decision to move are cost (34%), the pursuit of best practice (33%), range of investment options (28%) and quality of member communications (28%). A quarter (26%) named government policy, such as the Mansion House reform.
Some employers are keeping or have brought DC members into a hybrid trust in recent months to take advantage of a DB surplus, using this to pay DC contributions, including Aon and Schroders. Others are consolidating only certain DC members; Credit Suisse International is transferring some deferred members to the Fidelity Master Trust.
The research was conducted for professional trustee firm Law Debenture by Censuswide among 150 finance decision makers in the UK who have input on their company’s defined benefit scheme. About 57% of these had DC schemes.
The survey identified a trend towards consolidation and specialised management, as close to two-thirds (63%) of employers expect to transition to either a master trust (41%) or an own trust (22%), while just 16% think they will move to a group personal pension. Only 1% are considering a return to DB.
“Our research highlights the proactive steps many UK businesses are currently taking to enhance their DC offerings and better serve their members' needs,” said Elizabeth Hartree, a trustee who heads up DC at LawDeb.
“On top of this, firms are having to navigate an increasingly complex financial and regulatory landscape. Upcoming changes, such as the pension schemes bill and measures to introduce targeted support, will have a seismic effect on the DC market; and while it could deliver positive, member-focused outcomes, it will require serious consideration from any business with a DC arrangement,” Hartree said.
She added: “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.”
LawDeb thinks a number of factors are making businesses change their approach, such as value for money – half (50%) of firms cited getting better value as their main driver. About two in five (41%) are seeking higher quality governance, while 37% cited the evolving regulatory environment.
Other factors influencing the decision to move are cost (34%), the pursuit of best practice (33%), range of investment options (28%) and quality of member communications (28%). A quarter (26%) named government policy, such as the Mansion House reform.
Some employers are keeping or have brought DC members into a hybrid trust in recent months to take advantage of a DB surplus, using this to pay DC contributions, including Aon and Schroders. Others are consolidating only certain DC members; Credit Suisse International is transferring some deferred members to the Fidelity Master Trust.
