Institutional Asset Manager Newsletter 01.03.24

Busy year ahead for pensions’ minister

He has been in the job for just four months but Paul Maynard, Parliamentary Under Secretary of State at the Department for Work and Pensions, has big ambitions to transform the UK pensions industry.
Addressing the Pensions and Lifetime Savings Association (PLSA) investment conference in Edinburgh this week, Maynard said 2024 would be "another busy year" for the industry, hinting at the possible introduction of a lifetime provider model.
The DWP recently closed a consultation on allowing all employees with existing pension pots to choose a single provider for their entire savings journey. The idea being to eliminate the need to start a new pension every time an individual changes employer.
Maynard was clear that small pots are bad value for members and providers, and reform is needed.
However, he conceded that introducing a lifetime provider model was a "fundamental, revolutionary change to the pensions system and is not something the government would embark upon lightly".
Maynard also acknowledged the strong feeling about such reform, noting that not all consultation responses were favourable.
The PLSA, for example, has expressed misgivings about moving to such a model arguing that "the system-wide outcomes that would be achieved by a lifetime provider model remain unclear" adding that the "radical nature of the proposed model has the potential to significantly undermine the successes of auto-enrolment (AE), which harness inertia for savers while maintaining the vital role employers play in negotiating on behalf of their employees, which itself supports continued innovation in the commercial AE market".
The PLSA conference also made much of greater consolidation in the defined benefit space with the Pension Protection Fund looking like the likely candidate to bring multiple small funds under its roof.
Meanwhile the case for encouraging greater investment in private markets by both DB and DC schemes continues, with the government keen to harness the trillions of pounds in retirement savings to drive the UK economy.
But that may be easier said than done, according to Dan Mikulskis, chief investment officer (CIO) at People’s Partnership, who says private markets are not accessible until investors reach a certain scale.
Speaking at the PLSA conference, Mikulskis says the governance and costs associated with investing in private assets preclude all but the very biggest investors.
We also bring you news on ESG from the conference, with research from Morningstar Sustainalytics revealing the huge differences in assets allocated to sustainable strategies by European and US investors.
While favourable sustainable investment regulation in the EU has helped boost the market, an anti-ESG movement in the US has hampered progress. However, Catalina Secreteanu, head of ESG solutions at Morningstar, said the backlash was not universally popular and was unlikely to derail the industry in the long term.

Gill Wadsworth, Editor
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