Sunday, 24 September 2017

    How will the DC class of ’17 shape up?

    What will be this year’s priorities for defined contribution schemes? 

    It’s been yet another year of change for defined contribution (DC) pensions, with a new Pension Schemes Act, the launch of the Lifetime ISA and an increasing emphasis on getting retirement options advice right.

    We’re exploring these and other aspects of DC design in our current DC Landscape survey, in association with Legal and General Investment Management. This survey, now in its fifth year, is a definitive barometer of workplace pensions practice – we need to know about your experiences to help us build our most comprehensive picture yet.

    And, if your scheme is demonstrating exceptional good practice you could even become one of our DC 50 list of top schemes.

    To whet your appetite, here are a selection of findings from our 2016 report, available online here.

    • · Although the majority of 2016’s schemes (63%) said the performance of their default fund was good, 20% rated it as just satisfactory – up from 14.3% in 2015
    • · Most of those that had not yet made changes to their default fund, to reflect freedom and choice reforms, planned to do so in the short to medium term, with 34% planning changes in 2016, and a further 37% in 2017
    • A huge 73% of respondents still used a lifestyle fund for their default, with 14% choosing a target date fund and 4% a DGF. This compares to 70%, 10% and 10% in 2015 respectively. 
    • The average percentage of membership invested in the scheme’s default fund was 82%
    • We asked schemes in 2016 what they targeted in the final asset allocation of their default funds: 34% said an annuity, 15% cash and 14% drawdown; 37% said a mix of all three
    • Seventy-three per cent of respondents believed that the introduction of Lifetime ISAs would affect auto-enrolment negatively
    • The opinions weren’t as clear-cut when we asked respondents whether they believed that the introduction of LISAs will diminish the importance of the DC plan for employers –27% replied yes, 37% no, and 36% were not sure
    • When it came to post-retirement options, 46% responded these were provided by the insurer that runs the scheme, plus an open market option.
    • Twenty-two per cent said the options were provided by a third party financial adviser; 21% specified a broker
    • Sixty-seven per cent of respondents have had requests for defined benefit to DC transfers, an increase from 47% in 2015.
    • Sixty-seven per cent of schemes said that the scheme website or intranet is the most effective medium of communicating with members
    • Communications was the top priority in the year ahead in 2016 (32%), with post-retirement options second at 18%.

    To help us gather this year’s key findings, please complete the DC Landscape survey. This is open to workplace schemes of all types - including those that are outsourced to a mastertrust or GPP provider. If you have a DC scheme, we want to hear from you! 

     

     

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