With the UK government looking to announce the outcome of several consultations launched as part of the Mansion House Reforms in its autumn statement, consultancy XPS Pensions Group has warned that reforms should not be rushed over the summer period, giving the industry adequate time for comment and reflection.
According to an XPS poll of 200 pension schemes, only 30% currently support chancellor of the exchequer Jeremy Hunt’s plans to encourage pension schemes to invest in UK growth.
On Monday night, Hunt outlined government plans to unlock up to £75bn of additional investment from defined contribution (DC) and Local Government Pension Schemes (LGPS) to help grow the UK economy.
Only 4% of respondents thought more trustee training, an area on which the government is currently consulting on to improve investment practices, would have the most impact.
In contract, 43% of those taking part in the poll believe a fundamental change to the flexibility of funding and investment regulations is the most important change needed to allow more investment by defined benefit (DB) schemes in UK growth.
This, XPS said, suggested that broader engagement is needed on government’s plans. It said that the consultation on DB options is very limited with a short time over the summer to reflect on the options.
It added that “ideally” this should reflect a broad range of options from across the industry, with proper time to assess the impact and safeguards of the options available.
The Work and Pensions Parliamentary Select Committee is currently carrying out a wide-ranging investigation into DB pensions. However, the outcome is not expected until next year, well after government plans to announce its policy in the autumn statement.
Wayne Segers, partner at XPS, said, “Any fundamental change to UK pension policy requires careful scrutiny and consultation to ensure that the most important outcome – protecting the savings of members – is upheld.”
Segers added that DB schemes are around 95% funded against insurer funding levels and have much improved security for members.
He said: “We believe there are several policy changes that can help improve efficiencies in DB pensions, notably looking at rules on surplus to improve employee savings and investment in businesses.”
However, he added that, as the poll indicated, it is important that the government seeks a range of views through an extended consultation process.
He continued: “While we are very supportive of a rethink in policy that can help improve outcomes for members and lead to more diversity in pension investment, we believe such fundamental change should not be rushed over the summer.”
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