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Speaking at the launch of the Pension Protection Fund’s (PPF) Purple Book last week, a panel of industry experts including a former UK pensions minister and the chief executive of the pension fund trade association discussed the potential for collaboration and what barriers funds face.
Joanne Segars, chief executive of the Pensions and Lifetime Savings Association (PLSA), told the assembled journalists that there was “quite a lot of appetite for consolidation” among both defined benefit (DB) and defined contribution (DC) pension schemes, particularly in light of the radical changes taking place with the Local Government Pension Scheme (LGPS).
She added: “With smaller schemes, the trustees are less able to get a good deal from their advisers and hold them to account. They are much less able to access to some of the bigger, more interesting and more helpful asset classes.”
Tom McPhail, head of pensions research at Hargreaves Lansdown, said arguments in favour of consolidation were “incontrovertible”, such as improved governance, improved investment returns and greater efficiency.
Last month, in its scathing review of the asset management sector, the Financial Conduct Authority said the consolidation of pension funds would help bring about greater professionalism, allowing trustees to hold providers to account.
Appearing in front of parliament’s Work and Pensions Select Committee last month, Lesley Titcomb, chief executive of the Pensions Regulator (TPR), said consolidation “could be valuable both in the DB and the DC market because it could bring benefits of scale and cost savings, and drive up standards of trusteeship”.
Andrew Warwick-Thompson, an executive director at TPR, added: “We see huge potential, particularly for those small sub-scale schemes, for bringing them together to support better funding outcomes by reducing their administrative investment and governance costs through some form of consolidation.”