The latest research from the PLSA is a snapshot of evolving attitudes in the pensions sector.
Over the last year, the research team at the PLSA have been surveying members on a range of subjects to help inform our responses to consultations and feed into our policy views, as well as to understand member views on the current and future situation.
Research to inform our responses to consultations has covered a range of topics including the DB Funding Code, McCloud, TCFD, ESG and the pensions dashboard among others.
Recently we carried out research among more than 120 senior staff working in workplace pensions across the UK, from a range of sectors and sizes. The survey provides us with insight into the workplace pensions sector.
Key findings from this survey are as follows:
- Growth prospects: 76% of PLSA members said they weren’t expecting to see economic growth in the UK over the next 12 months. More than half (53%) of survey respondents expected the economy to grow again in the next three years. This proportion rises to three-quarters (74%) over five years.
Design of the pension system
- State Pension: Most pension funds (63%) believe that the level of the State Pension (with the triple lock annual increases) is currently about right.
- Automatic enrolment contributions: AE has been a huge success in getting most employed people saving for retirement. More than three-quarters (76%) of PLSA members surveyed said that the current contribution level of 8% under AE is too low.
- Drawing money out – the Pensions Freedoms: Two-fifths (43%) of members said that the Pensions Freedoms should be reformed, most often through the provision of better guidance and advice (30%), being better regulated (20%), and through controls on how much can be withdrawn (11%).
- Covid-19: A third of survey respondents (33%) said they were concerned the coronavirus would lead to a drop in pension contributions as companies fail and employment becomes less secure. This could see a substantial rise in the number of workplace pension schemes moving to the Pension Protection Fund.
- Regulation: The majority of PLSA members (71%) considered current regulation of the UK pensions system to be too burdensome, while a quarter (26%) felt that current regulation was about right. Over the last 12 months, TPR’s new supervisory approach was considered to be the most impactful regulatory change for pension schemes (36%).
Future trends for workplace pensions: the next five years
- Consolidation: The most significant trend in the pensions industry over the next five years would be consolidation, said 48% of members.
- The role of technology: 50% of members we surveyed were currently investing in technology for pension schemes or planning to do so over the next 12 months. Improving saver engagement (42%) was the most anticipated impact of technology on the sector over the next five years, while improving understanding of pensions was the second most anticipated impact.
- Addressing climate change: Over a third (36%) of survey respondents identified climate change and ESG investments as another major trend. The most common reasons given were because it was felt to be an important cause for society (particularly climate change) and because such investments can offer high returns.
- Pension saver engagement: One of the biggest issues facing the UK is how to better engage individuals to save for and plan their future. Over half (53%) of respondents identified the pensions dashboard as the initiative most likely to be effective in improving member engagement. The midlife MOT (26%) and the PLSA’s Retirement Living Standards (24%) were identified as other effective initiatives that could increase pension saver engagement.
Despite the uncertainties created by Covid-19, pension schemes are facing the challenges of the future: engaging with the trend towards consolidation; seeking ways of harnessing new technology to help savers understand retirement income; and taking steps to deal with climate change.
About the research
The research was commissioned by the PLSA and conducted independently by IFF Research. It was conducted in August 2020 and comprised 129 interviews with PLSA members who represent a wide range of scheme types and sizes. More than half came from schemes with AUM greater than £1 billion. The full report can be found at the link below.