The future of DC: What is next and where are we heading?
The future of DC: What is next and where are we heading?
27 Oct 2023
In July 2023, the Chancellor of the Exchequer delivered his Mansion House speech, setting out key aspects of the Government’s future plans for pensions. The Mansion House speech included a series of initiatives to enable the financial sector to unlock capital for industries and increase returns for savers, while supporting UK economic growth.
This briefing considers both the short-term and long-term consequences to defined contribution (DC) pension scheme members, sponsors, providers and trustees of these developments. Download our full PDF below, or read a summary of our key insights below.
Key insights of the Mansion House speech
We are undoubtedly about to enter a period of change for DC pensions. The Mansion House speech has made it clear that the Government wants and expects the consolidation of DC schemes to accelerate in the coming years. Where this will lead is not entirely evident as of yet, however, we have noted the following trends which are increasing in momentum:
- Single-employer occupational trusts are consolidating quickly. We expect this to continue as the burden of governance increases through a new ‘Value for Money’ regime, which was addressed in this briefing.
- The master trust market itself is consolidating, with several providers entering partnerships or being absorbed into others.
- Collective Defined Contribution (CDC) schemes are gaining some momentum, and the wider use of these (e.g. as a provider of retirement income for the mass market) is being considered.
- Employers are reviewing remuneration strategies due to cost of living pressures, and the potential broadening of the automatic enrolment age and salary bands which will increase costs for many employers.
- Many defined benefit (DB) schemes are either reaching the ‘end-game’ and buying out, or they have reached a point of surplus and are considering how this could be utilised (perhaps to the benefit of people in DC schemes).
- The Government continues to encourage pension schemes and trustees to invest in private market investments.
Download our full PDF briefing which provides further information, outlines the changes and their implications, and highlights the key action for trustees and employers.