The Department of Work and Pensions has confirmed that its consultation paper on collective defined contribution schemes will be published imminently.
Speaking at the Corporate Adviser 2018 Summit, DWP senior policy manager David Farrar told representatives from the pensions industry to “expect the publication soon”.
However, he could no guarantee that next year’s Finance Act would contain the legislative changes needed to allow the creation of these new pension schemes.
He says: “We are taking a joined up approach and are engaging closely with the Treasury on the necessary tax changes that are needed.
“However it is a crowded legislative agenda, and all departments are struggling for parliamentary time.”
While Farrar confirmed that this consultation paper will be published soon, he was unable to say when the industry could expect the feasability study for the pensions dashboard. This had initially been expected in the Autumn.
However, Farrer says that the next steps outlining the development of this initiative would be published in due course.
Farrar adds that the DWP was working to help facilitate further consolidation in the DC pension arena. In total the number of DC pension schemes had more than halved over the past decade, falling from just over 4,500 in 2009 to just over 2000 in 2017.
This has led to a greater concentration of large schemes. DWP figures show the number of schemes with 5,000-plus members accounted for 93 per cent of the market in 2017. This compares to just 51 per cent of the market in 2009.
At the other end of the scale DC pension schemes with between 12 and 99 members had fallen from 4 per cent of the market in 2009 to 0.3 per cent last year.
Farrar says that he expects this trend to continue and accelerate, and government policy should help encourage this. “Evidence suggests that larger schemes provide cost savings benefits for members, as well as better governance.”
“This trend has someway to go. If you compare the UK pensions scene to that of Australia or the Netherland you will see that we have a population that is three times the size of either of these countries but we have around 40 times as many pension schemes.”
However, Farrar says the DWP is currently stopping short of driving consolidation through legislation. However he points out that the recent regulation of master trusts will in effect drive through more consolidation in this part of the industry.
He says: “At the moment we are enabling consolidation, but we cannot ruling out forcing through consolidation in future if we believe it to be in members’ interest. This is something ministers would be reluctant to rule out. However this is something for the late 2020s or beyond, natural consolidation still has a long way to go.”