More than three quarters of pensions industry professionals expect the sector to successfully navigate the significant reforms proposed over the next few years, according to new research from trade body Pensions UK.
The findings, released ahead of Pensions UK’s Annual Conference in Manchester this week, show that representatives of defined benefit (DB) and defined contribution (DC) markets expect significant transformation in the decade ahead.
Around 44% of respondents to Pensions UK’s member survey expect major change by 2035, with more than a quarter (28%) expecting it within the next five years. Despite that, 77% said they were confident the industry would successfully adapt to demographic and economic shifts, and one in five (22%) described themselves as extremely or very confident.
“The momentum created by the Pensions Schemes Bill and the Pensions Commission provides a once-in-a-generation opportunity for the industry to support government in driving change that really works for savers.”
Zoe Alexander, Pensions UK
The government has set out an ambitious reform agenda, with plans to create DC “megafunds” of at least £25bn over the next decade, while the Pension Schemes Bill also includes reforms aimed at establishing more DB consolidators and freeing up surplus capital from well-funded schemes.
Retirement adequacy dominates concerns
Three-quarters (74%) of Pensions UK members identified inadequate outcomes for DC savers as the sector’s biggest challenge in the 2030s. Respondents warned that growing reliance on DC schemes could see more people working longer or retiring into relative poverty.
It comes as the Pensions Commission has commenced its work investigating inequalities, inadequacies and gaps in the UK pensions system. The commission was relaunched by the government in July and tasked with ‘finishing the job’ begun by the Turner Commission 20 years ago.
Other challenges highlighted by the report included the sustainability of the state pension and the future of the triple lock, as well as the pressures of an ageing population and a shrinking contributor base.
Nearly a quarter (23%) of respondents called for higher contribution levels and reform of automatic enrolment, while others prioritised better defaults and retirement options (15%), political stability (15%) and simpler communications (15%).
Opportunities ahead
Technology and digital innovation were viewed as the greatest opportunities, cited by 62% of respondents to the Pensions UK survey.
Respondents highlighted the potential of tools such as pensions dashboards, artificial intelligence, and data analytics to improve personalisation and engagement – although 27% warned these advances might not lead to meaningful behaviour changes from savers.
Investment, ESG, and consolidation were also seen as growth areas. Around a third (32%) expressed concern over political pressure to invest domestically, but 30% saw the sector’s role in supporting economic growth as an opportunity.
Zoe Alexander, executive director of policy and advocacy at Pensions UK, said: “Now is the time to get ahead of change and shape the next decade for the pensions sector. Our report brings together the views of members and wider industry experts, giving a detailed picture of the challenges and opportunities ahead.”
She added: “The momentum created by the Pensions Schemes Bill and the Pensions Commission provides a once-in-a-generation opportunity for the industry to support government in driving change that really works for savers.”
