Consolidation is the most anticipated trend in the UK’s pensions industry over the next five years, the country’s pension fund association has said on the back of a survey it had carried out.
Respondents – senior pension executives, fund trustees and others – were asked about challenges and opportunities on policy issues such as the impact of COVID-19; the role of pensions in society; environmental, social and governance factors; technology; automatic enrolment; and accessing pensions.
On future trends, the PLSA said respondents identified consolidation, climate change, the use of technology and saver engagement as the most significant future trends the pensions industry would face over the next five years.
Consolidation was the most anticipated, with 48% of the 129 interviewees saying this was the most significant future trend.
“It is widely expected that assets under management continue to grow and as funds undergo value for money assessments they will seek out greater economies of scale,” said the PLSA.
“This will lead to fewer but larger pension funds in the future.”
The association said it welcomed the current trend towards consolidation, but that scale should not be pursued as an end itself.
The next most anticipated trends were climate change and “ESG investment” (36%), and the future of defined benefit pensions in the public sector (26%) and improving member engagement and contributions (26%).
The PLSA said that among survey respondents that agreed that pension schemes should be used to help combat climate change and other ESG issues, the most common reasons given were because it was felt to be an important cause for society (particularly climate change) and because such investments can offer high returns.
When asked which initiatives could be the most effective in improving member engagement over the next five years, more than half (53%) of respondents identified the pensions dashboard. A mid-life “MOT” – in the UK an MOT refers to the ministry of transport’s annual test of vehicle safety and roadworthiness – and the PLSA’s Retirement Living Standards were identified as the next two most effective initiatives, chosen by 26% and 24% of respondents.
Today LifeSight, Willis Towers Watson’s master trust, announced it has embraced the Retirement Living Standards, launching an enhancement of its “AgeOmeter” tool to bring the standards to life. LifeSight has over 200,000 members from 25 employer defined contribution schemes.
Julian Mund, chief executive officer for the PLSA, said: “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.
“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.”
The survey was conducted between 3 August and 21 August 2020 and comprised 129 interviews with PLSA members, who represent a wide range of scheme types and sizes.