Head of Corporate Sole Trustee Scott Pinder considers what the new government may have in store for the pensions sector and how trustees and employers can best prepare themselves.
One of two scenarios could play out in the pensions arena after Labour’s landslide general election win.
The first is that the significant margin of victory opens the door to more radical policy moves. The second is that more urgent priorities leave pensions near the bottom of the political agenda.
Both prospects bring challenges for defined benefit (DB) schemes, which are currently in something of a ‘pause and review’ moment. Accordingly, forward-looking employers should act now if they want to write their own destiny for workplace pension provision.
Overall, businesses must take an objective look at what they would like to accomplish amid existing constraints and how these could change in an uncertain future. In particular, you may wish to consider the following.
Review long-term strategy
On average, there are more opportunities for DB schemes today than there have been for many years. Schemes can choose to settle, run on, or create surplus.
Schemes that tick the last of these boxes face an important question: what is the actual purpose of your surplus?
As well as being used to fund benefits and/or expenses, the proceeds might be shared with the company – after all, it is the business itself that has borne the risk for many years.
Consider what lies ahead
There are several ways in which workplace pensions are likely to evolve over the term of this government and beyond.
For example, technology is set to play an ever-greater role. Auto-enrolment thresholds and contribution levels should change. Pressure to adhere to the General Code will mount. The capacity crunch in risk transfer markets may become more acute.
Will your scheme demand different skill sets and resources in light of such developments? If so, remember that this need not mean wholesale changes overnight – new abilities can be swapped in over time.
Make every pound count
This is a good chance to strip out inefficiency. The right tech and new governance models could reduce your management time to a couple of hours a month.
Working differently can also save money and speed up decision-making. For instance, real-time governance is likely to represent a more effective use of fees than the age-old commitment to quarterly trustee meetings.
There is no longer a case for gathering occasionally to discuss matters identified weeks earlier. In a world defined by hyperconnectivity and ‘perma-crisis’, events are likely to overtake you.
A genuinely responsive and robust governance framework should facilitate decisions that are both timely and informed – and these, in turn, should translate into wider cost efficiencies.
The long game
Politicians may have short-term horizons, but there are pension scheme members alive today who could still be receiving payments more than 80 years from now. This tells us that workplace pensions are here to stay.
UK companies must therefore start playing the long game. To make the most of recent pension innovations, we must see through this new period of office with cross-party and cross-industry agreement on long-term matters.
As a business, you should recognise what you already do well and what you could do better. Try speaking with experts and with other companies that have faced the same challenges.
Above all, remember that you still have some control over your own destiny, regardless of who is in government – so take it.
Scott Pinder is head of corporate sole trustee at Law Debenture.
This article was originally published by Pensions Expert - read it there: https://www.pensions-expert.com/More/Comment/The-cornerstones-of-post-election-pension-provision
