Pensions World

What does 2012 have in store?

2012 will no doubt be another year of change and challenge for the pensions industry, not least because the largest employers – together representing millions of UK workers – will reach their auto-enrolment staging dates, but also because of the continued economic turbulence that will affect both sponsors and members of defined benefit (DB) and defined contribution (DC) schemes.

The future is DC

Most employers are likely to choose a DC scheme to fulfil their new auto-enrolment duties and to this end it is vital that we work hard now to make sure that each and every DC scheme is designed and run to the highest possible standards.

Many DC schemes do not currently have the characteristics necessary to consistently deliver a good outcome for members and our task is to find practical ways to help the industry to improve those standards. In late 2011 we took the first step by publishing six principles for good scheme design and governance. We are now in dialogue with key industry representatives to discuss how best to support the industry in putting these principles into practice.

Managing the DB challenge

Although DC is likely to account for the vast majority of new schemes in the future, DB will remain an important part of the pensions landscape for many decades to come and we are committed to helping sponsors and trustees of DB schemes to protect members.

Although we cannot be sure what the economy has in store in 2012, we are confident that the scheme specific funding regime remains robust and flexible enough to enable funding arrangements to be made both in the face of current challenges as well as those of the future.

But we also recognise that trustees continue to face difficulties. With this in mind, starting in spring 2012, we will publish an annual statement for trustees carrying out valuations at that time. This will take into account the prevailing economic conditions and will set out our expectations of trustees in light of those unique economic circumstances.