Mansion House 2024: Reforms to the DC pension market
Mansion House 2024: Reforms to the DC pension market
19 Nov 2024
What you need to know
- On 14 November 2024 in her first Mansion House speech, the Chancellor set out plans for consolidation of DC pensions. Concurrently, the government’s Pension Investment Review interim report was published, alongside a new DC focused consultation ‘Pensions Investment Review: Unlocking the UK pensions market for growth’.
- Overall, the government is of the opinion that larger pension schemes have the power to increase saver returns, and boost investment in UK ‘productive assets’. The interim report therefore sets out the government’s ‘long-term vision for a defined contribution pension system with fewer, larger and less fragmented schemes’.
- The consultation includes the following proposals:
- For multi-employer schemes including Master Trusts, Group Personal Pension and contract-based arrangements, there should be a minimum size of perhaps £25bn-£50bn and maximum number of default funds per provider, which would apply from no earlier than 2030.
- Increased powers to be granted for contract-based pension providers to consolidate their arrangements, without the existing need to seek member consent.
- A greater focus on value rather than cost, to be taken by stakeholders including employers, consultants and advisors.
- Greater investment in UK productive asset classes such as infrastructure and private equity, with the inspiration being arrangements in Australia and Canada where this is commonplace.
- The consultation closes on 16 January 2025, with a new Pensions Bill still expected in the spring covering material elements of the frameworks raised at Mansion House.
- Interestingly, the focus was on multi-employer DC arrangements rather than single employer trust-based schemes. The implication is that the forthcoming Value for Money requirements, previously consulted on, are seen by government to adequately prompt these schemes to provide good value or consolidate.