The pensions industry has had to deal with changes across many fronts in the recent past. 2015 was no exception, bringing proposals for Local Government Pension Scheme pooling, the introduction of freedom and choice and the beginning of re-enrolment.
2016 looks set to continue in the same way, as a number of large changes floated this year – namely the consultation on tax incentivisation – develop into proposals and possibly legislation.
Richard Butcher, managing director at professional trustee company PTL, said one of the biggest unknowns for the industry was the consultation on the tax structure for pensions. It introduces the idea of changing the system so savers are taxed when they put money into their pension, rather than when they take money out as is the case now.
Butcher said: “What we don’t know yet is what that’ll look like… [when the consultation response is published] we could all be out of a job or looking forward to a bright and rosy future.”
There is a danger that the costs [of implementing change] will exceed any improved outcomes for members
Margaret Snowdon, JLT Employee Benefits
It is unclear how such a change would affect the industry, Butcher said, but in the meantime, coming events are likely to have more binary outcomes.
“One thing to look out for will be in April, when independent governance committees have to publish their value-for-money assessments,” he said.
Butcher added the publication of the reports would be a “field day for the press and industry”.
Other issues Butcher mentioned were the ongoing debate over transaction costs and the potential for a referendum on Britain’s exit from the European Union.
IRM and covenant guidance
Others were more focused on regulatory change facing schemes. Simon Kew, assistant director of the pensions advisory team at consultancy Deloitte, said continuing guidance from the Pensions Regulator would give schemes an indication of where to focus.
“For 2016, from our perspective, the regulator’s focus on integrated risk management will be very important, particularly as you have many schemes going through their triennial valuations,” he said.
The Regulator issued covenant guidance last year, but Kew said he expected further guidance on the Regulator’s conception of the “21st century trustee” and how it would impact IRM.
“I believe there will be more focus on asking trustee boards to show how they’ve integrated their advice. It shouldn’t be a seismic shift, but there will be more focus,” he added.
Kew said schemes should also look at forthcoming guidance to see what to concentrate on.
Costs of change could exceed improved outcomes
Margaret Snowdon, executive director at consultancy JLT Employee Benefits, said the volume of change posed a potential challenge for schemes, as “a lot of money will be spent dealing with change”. She added “there is a danger that the costs will exceed any improved outcomes for members”.
Snowdon said one of the biggest issues for schemes would be the end of contracting out, but noted that guidance from the Pensions Administration Standards Association would be launched in January to help.
She also pointed to the threat posed by cyber crime, which she said would lead to increased focus on scheme security.
Other things to watch out for, she said, were the regulator increasing its focus on trustee training, as well as administration service quality and value for money.
