There is widespread industry support for the government’s ‘Mansion House’ pension reforms, with particular interest in the expansion of collective defined contribution (CDC) pensions.
A recent webinar poll by Aon asked industry professionals which pension reforms they were most positive about. A total of 36 per cent of industry professionals cited moves to to develop CDC schemes — the single most popular option.
This was followed by 29 per cent expressing support for reforms to DC pensions. This included 16 per cent voting for small DC pots consolidation and 13 per cent supporting proposals to increase the focus on value for money for DC workplace pension schemes.
Among the other options chosen, running-on defined benefit (DB) schemes with an investment strategy aimed at maximising value for scheme stakeholders – including the sponsor – was the second most popular single reform at 17 per cent.
Aon partner and head of UK pension policy Matthew Arends says: “Both the support shown for and the level of engagement with the proposals outlined in the Chancellor’s Mansion House speech are genuinely significant.
“Most important – and highlighted by the Chancellor as the first golden rule – is that anything proposed has to be with the aim of securing the best possible outcome for pension savers.
Aon partner and head of Collective DC Chintan Gandhi adds: “The Mansion House reforms have added to the momentum around CDC – and that really is to be welcomed. The Chancellor has recognised that CDC schemes have the potential both to offer better outcomes and to facilitate wider investment opportunities – one of his key objectives for the broader economy.
“By pooling risk and aspiring, but not guaranteeing, to provide increases to pensions, CDC schemes can help navigate new forms of volatility and hold more return-seeking investments – and over a longer period – than DC and closed DB schemes.
“For investment strategies, this means the time horizon of a typical CDC scheme will be longer than the lifespan of a typical individual DC member – and allows for all members to take a less conservative investment strategy and with a longer time horizon. That, in turn, means that CDC can allow members to have access to a wider investment opportunity set than typically seen with closed DB or individual DC schemes.
“Infrastructure is a great example of how this could generate returns and aid the transition to the low carbon economy. However, CDC schemes can go further, including through investment in private equity focused on new and emerging technologies with broader environmental or social impacts – and potentially address the bigger goal of helping grow the UK’s economic prosperity.”
