Eight out of 10 businesses (80 per cent) expect to change the type of DC scheme offered in the coming years, in a bid to take advantage better value for money options and improved governance.
The survey, by LawDeb Pensions, found that the evolving regulatory landscape is likely to act as a catalyst for widespread changes.
The research founds a clear trend towards consolidation and specialised management, with almost two-thirds (63 per cent) of these businesses surveyed expecting to transition to either a master trust (41 per cent) or an own trust (22 per cent). Only 16 per cent foresee a move to a group personal pension (GPP). Not surprisingly only 1 per cent are anticipating a return to a defined benefit (DB) scheme. Despite the strong impetus for change, one in five (20 per cent) businesses indicate they will maintain their current arrangements.
LawDeb says the decision to re-evaluate DC provisions is multifaceted, with a number of factors pushing businesses to change their approach. Value for money stands out as the biggest driver of change, with half (50 per cent) of firms citing securing improved value as their main motivation.
This is followed by the need for strong and robust management, evidenced by 4 per cent looking to make changes in order to ensure a higher quality of governance. The ever-evolving regulatory environment is also playing a role in prompting businesses to reassess their schemes, with over a third (37 per cent) of those with DC schemes expecting to make changes as a result.
Other notable factors influencing these decisions include cost (34 per cent), the pursuit of best practice (33 per cent), the range of investment options (28 per cent), and the quality of member communications (28 per cent).
Government policy, such as the Mansion House reform, is also impacting around a quarter (26 per cent) of businesses, highlighting the broader economic and political influences on pension planning. Inertia may also be in play for one in five (20 per cent) businesses, who attribute their current provision to being what they’re familiar with.
LawDeb Pensions trustee director and head of defined contribution Elizabeth Hartree says: “Our research highlights the proactive steps many UK businesses are currently taking to enhance their DC offerings and better serve their members’ needs.
“On top of this, firms are having to navigate an increasingly complex financial and regulatory landscape. Upcoming changes, such as the Pensions 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. 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.”
