Nimble governance here to stay

It seems unlikely that our world will simply go back to how it was before. Whilst many of us are craving more face-to-face contact and tiring of endless video calls, it seems inconceivable that even in the long-term we will fully revert to rigid quarterly meeting cycles of all-day face-to-face meetings. The long-term picture is likely to be a mixture of face-to-face and online meetings of shorter duration with more nimble, diverse boards who are recruited on a new set of criteria which include resilience and the right mix of skills for being effective in both face-to-face and online meetings.

Member outcomes in even sharper focus

In the short to medium term, economic conditions may depress member and sponsor contributions. Combined with subdued investment returns, member outcomes will be of more concern than ever. We already have a big problem in the UK in terms of the adequacy of DC pensions to provide a reasonable standard of living in retirement and, as the DB generation gives way to those with DC-only provision, the stark reality of DC member outcomes will be revealed. As the economy recovers, this may lead to a longer-term focus on increased contributions and clever drawdown strategies that maximise an individual’s pension pot over their post-retirement period.

Consolidation to continue with greater scrutiny on value

In the short to medium term it is debatable whether the pace of consolidation will speed up. Whilst some employers will be keen to accelerate cost reduction exercises, others will be ‘standing still’ and deferring any project spend. This is a natural reaction to a crisis as we all wait to see how the dust settles and what the impact is on the economy and on the Master Trust market itself, particularly those Master Trusts who have many participating employers in badly hit sectors like retail and tourism. In the longer-term however, it seems likely that COVID-19 will exacerbate trends in market consolidation although this will also bring greater scrutiny on the value provided, both within a particular Master Trust and across the wider market.

This article featured in the September 2020 edition of PMI Pensions Aspects magazine.

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