Members must be centre of Pensions Review, industry says

Organisations have been publishing their responses to the government’s call for evidence, one of the initial stages of the Pensions Review.

Themes include consolidation, the roles of master trusts and group personal pension (GPP) arrangements, the structure of the Local Government Pension Scheme (LGPS), and how to boost investment in UK assets.

However, throughout most responses seen by Pensions Expert, industry experts have emphasised that the government needs to put members at the centre of its considerations.

Legislating for UK allocations ‘risky’

Two of the 10 questions published by the government at the start of this month mentioned “requirements” or “interventions” aimed at increasing pension scheme allocations to UK productive assets such as venture capital or infrastructure.

Industry responses have strongly rejected this idea.

Steven Cameron, pensions director at Aegon, said scale and expertise would play a major role in ensuring schemes can access productive assets “in a well-governed manner”.

He added that, regardless of scale, “decision-makers must be left to assess whether such investments will deliver benefits over alternatives”.

“It would be highly risky to legislate for particular investment allocations,” he said. “Trustees and independent governance committees will be very much against being forced to invest their schemes assets in a particular way if they believe this is not in the member’s best interests.”

Any legislative requirement to invest in UK productive assets could “backfire”, he added, if performance drops or people perceive that their pensions are being used to prop up the economy.

Renny Biggins, head of retirement at the Investing and Saving Alliance (TISA), added that a “one size fits all” approach to UK allocations could undermine the aims of the Value for Money framework.

“While global equities have outperformed UK stocks in recent years, the solution lies in incentivising investment in UK productive finance through measures like reinstating the dividend tax credit or scrapping stamp duty – not through compulsion,” he said.

Targeted incentives such as these would help to increase the supply of opportunities for investors and the flow of capital into UK businesses, he said.

Saefguarding financial futures

“At the heart of every pension scheme is the duty to safeguard members' financial futures,” Biggins stated.

“If we want to see more investment directed into UK opportunities, we need smart, targeted policies that balance risk and reward, while ensuring members always receive the outcomes they deserve.”

The Pensions Regulator has said it will scrutinise investment strategies but will not place any requirements on schemes for particular asset allocations.

Consolidation featured heavily in the government’s questions, reflecting the Pensions Regulator’s ongoing focus on “fewer, larger schemes”. However, consolidation should not be seen as a “silver bullet”, experts warned.

Lizzy Holliday, director of public affairs and policy at Now Pensions, said it was “crucial that members’ best interests remain the priority”.

She added: “Consolidation for its own sake, without considering the broader impacts, could reduce competition, limit choice, and stifle innovation.”

Tim Middleton, director of policy and external affairs at the Pensions Management Institute, warned that excessive consolidation could make some schemes “too big to fail”.

“If the overarching goal is to improve quality for members, consolidation has the potential to create as many problems as benefits,” he said.

Becky O’Connor, director of public affairs at PensionBee, said: “It is crucial that any changes prioritise savers’ best interests. While consolidation offers potential benefits like reduced costs and regulatory simplicity, it is not a silver bullet for stronger returns, but it can facilitate the expertise needed to drive an expansion into more complex asset classes.

“We urge the government to focus on fostering a diverse investment landscape that balances innovation with protection, ensuring savers’ rights are upheld at every step.”

GPPs and master trusts

Group personal pension arrangements (GPPs) featured in the call for evidence, with the government keen to find out more about the role they play in defined contribution provision alongside master trusts.

Aegon’s Cameron said there was a role for both structures, and emphasised that the evolving regulatory regime meant there was “no reason that either a master trust or GPP will be ‘better’ for member outcomes”.

TISA’s Biggins, added that smaller DC schemes, including single employer trusts, still offer “critical benefits”.

“Their closer ties with employers and employees can foster more personalised services and greater engagement, often exceeding what master trusts and GPPs can offer,” he said.

Holliday concluded that the UK’s pensions system faced “immediate and long-term challenges” that the government needed to consider.

She said: “We believe it’s time for a more strategic, consensus-driven approach to reform, with clear safeguards in place to ensure that pension savers remain at the heart of all decisions.”