How 150 DC schemes are responding to the last 12 months in pensions
We seem to say this every year, but 2015 has been a time of unprecedented change for the defined contribution market. The freedom and choice agenda announced in the 2014 Budget came into force on 6 April and has rocked DC provision irreversibly.
The DC Landscape survey has now been running for three years – and they just happen to have been three of the most earth-shattering in pensions history.
In association with J. P. Morgan Asset Management we spoke to more than 150 DC pension schemes to find out just how they were coping with all the change.
Schemes were still taking their time to get to grips with the new flexibilities, and reviewing their offerings accordingly, but the industry is clearly already feeling the ripples.
The proportion of members buying annuities, for example, has dropped from almost 100% to just 12.5%, and half of the schemes we spoke to had received enquiries about transfers from defined benefit to DC – something that was historically seen as disadvantageous to a scheme member.
A number of schemes had overhauled their default funds, and introduced features that would make them more appropriate for the new world of freedoms.
Some were considering offering drawdown arrangements within the scheme, or making it easier for their members to take their benefits as cash when they retire.
Communications was another area to be hit hard by the changes. Members are increasingly aware that there are new choices available to them, and schemes must take responsibility and ensure that members actually understand what is on offer.
The future of DC provision is in the hands of today’s schemes and providers, and they are taking on that mantle with the seriousness it deserves. For the third year, we showcase shining examples of best practice among schemes, based on their investment strategy, scheme design, communications, governance and administration structures.
We hope you will find the results as enlightening as we have. To download the report click here.