The UK pensions industry is “creaking under the weight” of too much legislative change being pushed through at the same time, the chair of the Association of Consulting Actuaries (ACA) has said.
“A widescale capacity crunch is already happening and set to get worse as dashboards, GMP equalisation, simple statements, scam prevention and climate change are all competing for space, alongside fundamental changes to DB funding regulation and DC value for money,” said Patrick Bloomfield, commenting on findings of a survey carried out by the ACA.
Based on 212 responses from employers of all sizes, covering over 400 different schemes, the survey found that three-quarters of employers were expecting more trustees to consider resigning due to the scale of new responsibilities they face from additional regulatory requirements.
Almost nine in 10 employers were expecting more pension schemes would struggle to find individuals prepared to take on trustee roles, with 19% saying they were considering sole trusteeship to simplify governance.
Over half (57%) indicated they expected governance costs to increase by over 5% per annum.
According to recent resarch from Isio, a growing regulatory burden and a desire for improved governance is driving rapid growth in the professional trustee market.
ACA’s Bloomfield said that unless steps were taken to manage the pressures being put on pension schemes, “we risk killing off the UK’s traditional model of trusteeship”.
“This would all but remove the member representation in trustee boards, which was seen as such a positive step forwards 25 years ago, following the Maxwell scandal.”
PLSA chimes in
Commenting on the ACA’s findings from its survey on the impact of regulation, Nigel Peaple, director of policy and advocacy at the Pensions and Lifetime Savings Association, said: “There is a huge amount of regulatory change facing pension schemes in 2022 and widespread concern about the industry’s capacity to handle so much at once.
“A certain amount of regulatory change is necessary, but a balance must be struck between the benefits it delivers in terms of better retirement outcomes, and the costs, which ultimately fall on individual savers and employers.”
Peaple continued: “To ensure we avoid over-regulation, it is important that the Government does a proper cost-benefit assessment before making proposals and undertakes fully open and public consultation before proposing new requirements.”
In some respects the government is not moving fast enough, according to the ACA survey. In it, 58% of employers agreed that a delay in progressing legislation and regulation to enable consolidation of defined benefit arrangements was hampering decision-making, with support for the concept declining by a fifth over 12 months.
Those ‘undecided’ grew to over a third, with over 69% expressing concerns about potential reputational risks.
The government previously said it aimed to set out its “vision” for the future regulation of DB superfunds this autumn or winter. There has been an interim regime in place since June last year, when the pensions regulator published guidance.
“Brexit and COVID-19 have caused understandable delays in getting many pension policy issues over the line,” said Bloomfield. “We desperately need the government to focus on getting longstanding matters completed and implemented, before adding more things to the pensions to-do-list.”
Another survey finding highlighted by ACA is that over half of employers are not exploring DC consolidation options, although over a third said they had already adopted a DC master trust or made DC consolidation decisions.
ACA said this showed industry support for DC consolidation was weak, despite regulatory pressures to consolidate.
Separately, only half (51%) of pension scheme trustees/governing bodies said they had taken action to clean up pensions data in preparation for pension dashboards.
Half of respondents also said they though the first dashboards should be launched with basic information only.
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