Smart Pension has welcomed the Chancellor’s aim to boost investment in productive assets by driving consolidation in the UK workplace pension market. But it said the target of schemes reaching £25bn by the 2030 date will prove “challenging”, and expressed concerns that this could disadvantage more innovative providers, like themselves.
Smart Pension pointed out that many of the largest master trusts in the UK have failed to lead the market when it comes to investment into private market assets, and have not always delivered the best returns for savers. Smart Pension CEO Jamie Fiveash says: “ Being the largest provider doesn’t necessarily mean providing the best solutions or outcomes for members. Scale is important, but we need to ensure new legislation continues to support the competition and innovation that drives the UK economy.”
According to the latest Master Trust report by Corporate Adviser Insight, Smart had £4bn in assets at the end of 2023, although this figure now stands at £6bn. However it says that it is already investing 6 per cent of its assets into private markets.
Last week Rachel Reeves, in her Mansion House speech set out targets for UK master trusts to drive further investment into productive assets. It is proposed that they should have £25-£50 billion in assets by 2030.
Smart Pensions says this marks an accelerated step towards strengthening the UK pensions ecosystem, delivering better value for savers and accelerating economic growth driven by pensions providers.
Smart Pension’s assets have grown by over 5,900 per cent since 2018, and it has consistently been the UK’s fastest growing master trust. The company says it has led the industry with 10 master trust consolidations to date. Although it is still significantly below the £25bn target it says it is in a strong position to achieve the required scale, and now runs the pensions of 1.4 million savers. The organisation is also ahead of the curve in terms of the Chancellor’s investment aims, when it comes to investments into private markets.
Fiveash adds: “We are very supportive of the Chancellor’s goal for defined contribution pension schemes to get to scale, to further unlock their power to invest in productive assets.
“We have led the industry in acquiring 10 other master trusts, building the processes and systems to be able to deliver the scale the Chancellor seeks.
“However, we are concerned that the consultation lacks detail on how effective competition can be ensured given the high barriers to entry – particularly as providers like Smart Pension have challenged the status quo through innovation for the benefit of savers in recent years.
“We have proven our ability to access private markets and have more progressive investment strategies than many other established players. Being the largest provider doesn’t necessarily mean providing the best solutions or outcomes for members. Scale is important, but we need to ensure new legislation continues to support the competition and innovation that drives the UK economy.
“In addition to this, the 2030 date seems challenging – delivering this level of consolidation within the proposed timeframe will require the entirety of pension infrastructure to step up. This includes consideration of schemes consolidating on legacy systems with poor data, as well as the increased flexibility required from regulators, who will need to take a more pragmatic approach in order to facilitate consolidation at this pace and scale.”
He adds: “Smart Pension is open for business, and welcomes that this may further assist the consolidation market so other schemes, such as contract-based schemes, can move more easily where it’s in the best interests of the policyholders.
Andrew Evans, group CEO of Smart adds: “We are very supportive of the Chancellor’s goal to accelerate consolidation of the DC pension market. Our Keystone technology platform has powered similar rapid transitions elsewhere in the world and we have strong financial backing, receiving capital from Aquiline, MUFG, Chrysalis Investments and household names such as J.P. Morgan, Fidelity and Barclays.
“We fully recognise the benefits that such scale can bring to the UK from an investment perspective, including encouraging pension schemes to invest in high growth businesses. Smart is the kind of business that would have delivered the benefit for UK savers the Chancellor is trying to achieve, and exemplifies the opportunities such initiatives could unlock. In the UK Smart Pension already has 6 per cent allocation to private markets, and has plans to do more, including further investments in illiquid assets, meaning this announcement fits extremely well with our own mission to transform retirement saving.”
