Too Fast, Too Furious: UK Pension Reform | Chief Investment Officer

(May 19, 2014) — The UK’s leading pension industry group has warned the government that its intended timeline to implement a raft of reforms may threaten members’ outcomes.

The National Association of Pension Funds (NAPF), which represents roughly 1,300 UK pension schemes covering 15 million members, voiced its concerns in a response to the Department for Work and Pensions’ March 2014 report, “Better Workplace Pensions: Further Measures for Savers.”

Joanne Segars, chief executive of NAPF, said the group strongly supports the government’s focus on improving baseline quality standards for workplace retirement programs.

However, she also suggested it had been overly ambitious, particularly with the controversial cap on management and administrative expenses.

“The budget set out some of the most far-reaching reforms to pensions in over 90 years,” Segars said. “While much of the detail of these reforms is yet to be confirmed we do know they must all be implemented by April 2015. In this context asking schemes to implement the 0.75% charge cap at the same time risks forcing schemes to do too much too quickly. Even with the best intentions, this can only jeopardize good outcomes for scheme members.”

Pensions plans have been telling their industry group that the volume of regulatory changes coming due in the next 11 months have stretched their resources to the limit, according to the response.

In its “Better Workplace Pensions” report, the Department for Work and Pension wrote, “the government recognizes the significance of the reforms and understands the need to introduce them in a measured way.” However, its timeline called for the 0.75% expense cap to be applied to all schemes by next April, but delays the decision on whether that maximum will include transaction costs until 2017.

With the expenses cap, NAPF recommended in its response that the government clarify exactly what schemes must do to stay in compliance, and give them 12 months to produce a plan.

“We recommend the government reviews the timetable it has laid out to ensure it allows room for schemes to get this right, not just get this done,” Segars concluded.