New SPP president targets DC outcomes – Law & Regulation

Barnett Waddingham partner Hitchiner will replace Isio partner James Riley as SPP president on June 1. 

In an exclusive interview with Pensions Expert, Hitchiner set out his ambitions for his presidency, while Riley reflected on the organisation’s rising member engagement, and pondered missed potential for co-operation between the SPP, industry and the government.

The SPP does not seek to change policy

The SPP describes itself as a “representative body for a wide range of pension advisers and service providers”.

The organisation has been vocal on a number of policy issues this year. Pensions minister Guy Opperman has lately appealed for input from industry on areas including value for money and collective defined contribution schemes, suggesting in March that the industry lacked long-term vision.

The SPP has expressed concerns over parts of the government’s agenda this year, including over the implementation of the pensions dashboards initiative.

It recently described the government’s proposals on driving DC investment in illiquid assets as “overly complex”.

In March, meanwhile, the SPP said that it had concerns over “potential unintended consequences” linked to the Pensions Regulator’s code of practice for the authorisation and supervision of CDC schemes, arguing that “the demands and hence cost of the code of practice are significantly too onerous”.

Hitchiner (pictured) was keen to stress, however, that the SPP is not a lobbying organisation.

“We don’t see our role as being to change policy as such, our role is to influence the implementation of policy,” he said.

“It’s a subtle difference, but it’s quite an important one. Our role is to make sure that policy is of good quality.”

Dashboards risk remains

Hitchiner emphasised the importance of being available to help the government, which he noted in practice need not always take place via consultations.

“There’s always going to be that tension between a minister who has got a policy agenda and an industry that can see the implementation problems, the really detailed stuff that the minister doesn’t necessarily care about,” he said. 

“You’re always going to have that imbalance, it’s the minister’s job to get things done.

“It’s also necessary to speak out on occasion, constructively, as we have done for example with regards to dashboards,” he added, citing concerns around the timescale for the initiative’s implementation. 

The government expects large schemes to start connecting to the dashboards’ digital architecture from April 2023 onwards, with a connection deadline for the first cohort — the largest master trusts — at the end of June 2023.

“We’re very supportive of the concept of the dashboard. Its delivery is going to be very complicated, I think that’s clear to anybody,” Hitchiner said.

“It’s very important that the industry is given sufficient clarity, and also time, to introduce things.

“Certainly, earlier in the year, we had some concerns around clarity and timescales… there is still a risk with delivering something that complicated, so I think we still do have some concerns, but it’s important that we engage constructively with the regulators on that,” he continued. 

“There’s no point just being concerned about something, we have to make positive suggestions about how we can move forward.”

SPP and industry could have done more with government

Outgoing president Riley (pictured below) has observed an increasing desire among the body’s membership to engage during his tenure.

He lamented, however, that both the SPP and the industry, with the exception of the dashboards initiative, could have achieved more with the government during his presidency.

“Being very candid, as an industry, could we have been more influential with government?” he mulled.

“We have responded to an awful lot of consultations, discussed an awful lot of topics with government, and I’m not sure we, as an industry but also as the SPP, have been as influential as I would have liked us to have been.”

Hitchiner was keen to highlight the swathe of developments in the defined benefit space, including the new funding and governance codes, climate-related disclosures, and the potential launch of more DB superfunds.

He observed, however, that more focus is required on outcomes for DC members.

“As an industry, I worry that there’s a little too much focus on DB run-off, and not enough focus on outcomes for DC members,” he said.

“That’s going to be a real focus both for me and for the SPP generally, I think, in the coming years, looking at those DC outcomes.

“We’ve got a big generation of people — almost like the first generation of ‘DCers’ — beginning to come towards retirement, and we need to make sure the system works for them,” he added.

CDC for decumulation needed

The new SPP president called for more options to be made available for DC members at retirement.

These could include variants of CDC schemes. Royal Mail is set to become the first UK organisation to launch its own CDC scheme.

“At the moment, if you’re the member of a DC scheme and you’re approaching retirement, you have a very binary choice — two quite extreme options,” Hitchiner said.

“One, is to basically guarantee everything, and that has quite a lot of expense associated with it. Or the alternative option is to go on your own and retain all of the risk yourself.

“In reality, there’s quite a wide range of options we could provide to members, and I guess you could put all of that under the guise of CDC,” he continued.

“The problem is that I think the sort of Royal Mail-style CDC schemes are only ever going to appropriate for a very small sector, and it won’t do anything for that group of DC members that are coming up to retirement.

“We do need more options for them — multi-employer CDC arrangements, possibly decumulation-only CDC arrangements.”

Hitchiner was adamant, however, that the advent of CDC is “extremely important”, even if CDC schemes devised for the likes of Royal Mail are only suitable for very large employers.

“That’s just the starting point, and what that does is it gives us the building blocks to then build other types of option that can reach more people — in particular, multi-employer CDC arrangements that offer a decumulation-only option, and that will then reach that whole group of existing DC scheme members,” he added.

Riley said that the legislative time devoted to creating CDC vehicles would only have been worthwhile “if we get CDC for decumulation”, a point that Hitchiner agreed with. 

“My personal view is, if we don’t, it wasn’t. We created a niche vehicle,” Riley said. 

“But if we get CDC for decumulation, all that hard work… it doesn’t matter that Royal Mail went first, if we get there, that’s valuable ground won.”