Happy New Year! I hope you all had fabulous breaks! 😊 It seems appropriate that my first blog of 2025 looks at what might be coming up for pension schemes this year.
Defined Contribution (DC) Schemes
So much change is expected here! Alongside Value for Money (VFM) framework development, the government is looking at setting minimum sizes for multi-employer scheme default funds, which could reduce the number of DC default funds to 30 by 2030. There is growing Government pressure for DC schemes to invest in alternatives, including illiquids and private markets and in UK productive assets. Schemes are still tackling how to balance return-seeking, volatility management, ESG considerations and some significant global economic turbulence. In addition the Government is looking to schemes to help with access to retirement income, and DC schemes are having to offer or provide access to default retirement income options, alongside some pathway guidance. Perhaps this year we will see greater diminution in the separation between saving and accessing pensions?
Defined Benefit (DB) Schemes
I’m seeing more about DB schemes considering run on (as in, keeping their scheme open) as an alternative to an immediate endgame strategy. It’s easy to get into the groove of thinking that most private sector DB schemes are, or should be, looking at their endgame. But the fact that the 2024 Purple book reported that 3,670 schemes are now in surplus (compared to 1,299 in deficit) makes me wonder if the conversation around DB schemes is going to change. And does this introduce more opportunities for those with open and healthy DB schemes to consider the introduction of Collective Defined Contribution?
Collective Defined Contribution (CDC) Schemes
Industry are waiting with bated breath for the Government to lay the final regulations for multi-employer CDC schemes. I think we’ve all heard the rumours of organisations working in the background on the potential for opening a CDC scheme. I expect once the regulations are finalised we will be seeing a few announcements! And, we get to watch what happens during the first full year of the Royal Mail scheme too. 😊
Local Government Pension Scheme (LGPS)
The Government announced a raft of expectations for LGPS during last year’s Mansion House statement. These include a requirement for all funds to be either invested through or managed by the eight LGPS investment pools, domestic and local investing targets for these funds and pool governance requirements. We can expect interesting progress updates as Local Authorities and pools adjust and update to meet these requirements.
And of course, will we get an adequacy review this year?
I’m looking forward to seeing how everything plays out!
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