Acknowledging the number of regulatory changes looming over the UK pensions industry, pensions minister Torsten Bell promised a “clear roadmap” of how these changes fit together.
Speaking at the Pensions and Lifetime Savings Association (PLSA) Investment Conference in Edinburgh this week, the new pensions minister updated on a number of reforms currently in the pipeline.
The minister said the government is getting ready to share the outcome of phase one of the pensions review consultation “later this spring”, which will also include the timing and details on phase two of the review.
He has also reiterated the government’s support for surplus extraction, with a consultation response due to be published later this spring as well.
For now, he said the industry’s £160bn (€190bn) of surplus is a “good problem to have” and is preferable to the previous problem of “perma-deficits”.
He said: “Surplus flexibilities will allow more well-funded [defined benefit] DB schemes to release resources back to business and scheme members where it is safe to do so and where trustees agree.
“They are best placed to determine, in consultation with employers, the appropriate use of any surplus in their scheme.”
He added that pension funds may want to examine the position of members with non-indexed pre-1997 accruals when considering the use of any surplus.
The minister has also reiterated the government’s desire for scale. “We want fewer, bigger, better pension schemes.”
“We want fewer, bigger, better pension schemes”
UK pensions minister Torsten Bell
He acknowledged that smaller schemes can deliver “great value for money” but for the market as a whole, and for savers on average, consolidation is “desirable”.
“Larger schemes are better placed to invest in more productive asset classes,” he said, adding that scale can also help reduce costs and increase bargaining power. “Both can help provide the headroom for building investment capability or just better returns for members.”
He acknowledged that scale is “just an enabler” and is “very far from a silver bullet” – it is part of reforms to focus more on value and less on cost or price.
Bell also acknowledged that in order to increase investment, there is a need for investable propositions.
He confirmed that in June the government will set its 10-year infrastructure strategy, adding that the British Growth Partnership is “there to help bring [venture capital] VC investment opportunities to pension funds” and the government will also work with local and regional governments to highlight investable propositions.
He added that the government has today introduced the Planning Bill to make sure that homes and infrastructure can be built at a necessary rate.
“If we’re going to invest once again, we have to make it possible to build once again,” Bell noted.
With these and other reforms and projects also underway, Bell recognised that there are “limits on any organisation’s ability to deliver”.
“I take those constraints very seriously. Not everything that could be legislated for will be legislated for in the forthcoming pensions bill and for exactly that reason we owe it to you to provide a clear roadmap of how these changes fit together,” he said.
Read the digital edition of IPE’s latest magazine
No comments yet