Ten years on from the introduction of automatic enrolment, more Brits than ever are saving for retirement – with an additional £28 billion saved in 2020 compared to 2012.
As well as continuing to expand the number of people putting money aside for their financial futures, we’re also committed to modernising the system to deliver the best possible value and long-term outcomes for savers.
That means shaking up the defined contribution (DC) market.
Last month, Cushon and Creative, two of the largest pension providers, announced a deal that will create the largest multi-employer scheme outside the longstanding Big Four. This represents the most significant merger since the introduction of authorised master trusts in 2018 and has the potential to positively disrupt the traditional DC offer.
Experts across the sector know change is needed and for too long the DC market has been hamstrung by a focus on the cheapest possible pension. Since DC began to emerge in earnest in 2015, the world has moved on and we now know that cheapest isn’t always best.
The years since 2015 have also seen COP26 and the Glasgow Climate Pact, in which almost 200 countries signed up to a plan to limit global warming to 1.5 degrees. This country is on a promising path set out by the Prime Minister and the Chancellor last August – to ignite an Investment Big Bang – but this cannot happen without all of us playing our part, including pension schemes.
Since becoming Minister for Pensions, I have championed the benefits greater consolidation can bring. Last year, I made regulations that will require all DC schemes with fewer than £100m in assets to undergo a rigorous value for money examination – the intention being that many will put members first and consider winding up their corporate scheme.
In June 2021, I published a further call for evidence to invite feedback and ideas as to how we can further pursue and accelerate scale in the DC market. Many have warned against further intervention by government. The truth of the matter is that, despite an encouraging trend, we still have thousands of DC pension providers in the UK and I am determined to do more.
An alternative to Government intervention is possible if providers of the size of Cushon and Creative continue to voluntarily merge and share their expertise, capability, and scale. This is surely the best outcome for members and providers alike.
I encourage others to follow the same path.
We plan to issue a response to our call for evidence in the coming months. In the meantime, we will work closely with regulators, and you, in industry, to build a simple framework for value for money that will enable comparison and encourage greater competition.
Through scale and competition, we can ensure the best possible retirement outcomes for millions of savers.
The post Guy Opperman: Consolidation can drive a better retirement for all appeared first on Corporate Adviser.
