It’s fair to say that this year has flown by… It’s hard to believe that 2022 is just around the corner. So, as this year draws to a close, we ask ourselves - what will 2022 bring for DC trustees and employers?

Master Trust Market

In 2022, we expect a continuation of the trends seen in 2021, with consolidation remaining central. We’ve already seen the master trust market starting to consolidate – with a reduction of 2 to 36 – and we anticipate this number to continue to fall to between 30-33 over the next 12 months. On the back of increased governance, and clear policy direction from Government, we also expect to see the move from single trust schemes to master trusts gain pace in 2022. It does not always mean that a Master Trust is right for every member and there may be particular benefits provided that mean the Master Trust could not the best option for members. It’s essential that any review of a pension arrangements considers member outcomes and achieves the best objectives for the sponsoring Company.

DC Investment

We expect continued emphasis on the roles various stakeholders have to address climate risks and capture opportunities. A second wave of pension schemes will come into the scope of TCFD governance and reporting requirements, ensuring focus on the subject and providing opportunities to improve the certainty of financial outcomes for an even wider range of beneficiaries. Effective stewardship will remain a key tool for holding companies, asset managers and other stakeholders to account to deliver on commitments made to address climate change. From an investment perspective, we will continue to monitor key economic indicators including inflation, which has been rising beyond central expectations. It’s important that pension schemes consider the potential implications, and take action where material to improve the certainty of their outcomes.

DC Governance

Pension pot sizes are rising, as are the overall value of DC arrangements. We expect many more employers to recognise the risks in a ‘set and forget’ pensions strategy and to establish governance committees to monitor the overall value delivered by their provider. It’s likely that 2022 will see providers being held to account and employers move from their current provider if they are not delivering value. Having an effective pension governance committee, focused on the right areas, is critical to achieving the best value you’re your pension spend and delivering great retirement outcomes for employees.

To and through retirement

As more DC members come up to retirement, there will be increased emphasis on how to better support members as they access their money. We know that for contract schemes, providers will need to offer to facilitate booking Pension Wise appointments, but there is more to follow for trust-based arrangements. More generally, there will be increased dialogue over where advice fits in, and at what price. We would also like to see an increasing focus on the gender pensions gap and how this can be addressed. There will be more dialogue this year on the retirement options and how they are being used. We’re keen to see whether the Investment Pathways are having an impact as they go through their first review or whether the awareness of enhanced annuities is gaining traction. And finally, we will watch and participate in the creative journey centred around designing decumulation defaults.   

Member Communications

With the launch of the simpler annual benefit statements, and the use of voting apps which allow members to express their views on responsible investment issues. Member communications are becoming increasingly more digital which is leading to a rise in member interest in their pension arrangements. Inevitably, this will put pressure on fiduciaries to think more about how their pension arrangements align with their company’s sustainable development goal targets.

Please get in touch with your usual Hymans Robertson Consultant if you would like to discuss any of these topics further.