DWP Future of the Defined Contribution Pension Market: The case for greater consolidation Call for evidence
On the 21st June 2021, the Department for Work and Pensions (DWP) published a call for evidence on barriers to greater scheme consolidation in the UK occupational trust DC market. This was with the intention to accelerate the rate of consolidation in the market. The document sets out the background to the current situation, offers some initial analysis and poses questions as to the best way forward in the interests of pension savers.
We welcome the recent emphasis placed on schemes to consider consolidation, but only where there is evidence that this improves member outcomes. Schemes of all sizes can deliver excellent outcomes for members, and consolidation should not be an end in itself but above all serve this purpose.
The average scale of DC schemes is already increasing as the market matures, due to both automatic enrolment and consolidation in the best interest of members. The thresholds proposed by Government in this Call for Evidence risk unintended consequences for pensions adequacy as they do not seem to take account of the current shape and size of the market and mixture of providers. We have also seen little evidence to support the suggestion that the benefits to members of consolidation outweigh the operational costs. Natural evolution is much more likely to improve members’ outcomes than a revolution to force consolidation at an unnatural pace.