Corporate Plan

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1 Corporate Plan May 2014

2 Contents Foreword 3 page Executive summary 5 Introduction 10 The Pensions Regulator The Corporate Plan Other public bodies concerned with pensions Regulatory approach 12 Statutory objectives Risk Educate, enable, enforce Key audiences Making complaints Performance evaluation The pensions landscape: issues and risks 18 Landscape Issues and risks Strategic plan Corporate priorities: To promote good governance and administration of work-based pension schemes To promote security and good outcomes for members of work-based pension schemes To promote employer compliance with their pension responsibilities To improve our organisational efficiency and effectiveness Business plan Workload assumptions Key performance indicators Resource summary Appendix 1: Risk appetite statement 56 Appendix 2: Governance 59 2

3 Foreword As the government makes firm progress implementing the pension reforms around automatic enrolment, and through new proposals on quality standards, automatic transfers and decumulation, the work-based pensions landscape continues to evolve. Many of these new initiatives will have implications for our role and the way in which we carry out our duties. Since The Pensions Regulator (the regulator) was established almost a decade ago, our core remit to protect the benefits of members of work-based pension schemes and to reduce risks to the Pension Protection Fund (PPF) has been steadily augmented. In 2008 we were given responsibility for applying the automatic enrolment programme to over 1 million employers and, from April 2015, we will have additional duties in respect of the governance and administration of public service pension schemes 1. This year, we expect to acquire a new statutory objective in relation to defined benefit (DB) scheme funding. The new objective makes it explicit that our approach to regulating DB funding should seek to minimise any adverse impact on employers sustainable growth plans while balancing the requirements of our existing objectives. Our revised DB code of practice and funding policy, to be published later this year, will set out how we will incorporate the new objective into our regulatory approach. In particular, we will encourage trustees and employers to work collaboratively to use the flexibilities in the system appropriately to best suit the needs of both the scheme and sponsor. Viewed collectively, these developments have added significantly to the complexity and scope of our role, and inevitably have an impact on our approach. The wide-ranging focus areas are all at different stages of maturity extending from initial policy development through to case management and policy review. Therefore, our new responsibilities have not only increased the breadth of our task, they have also generated the need for us to engage with an increasingly diverse audience. Our central focus remains the application of our operational approach to educate and enable those with pension responsibilities, such as trustees and now employers, and only where appropriate to undertake enforcement action. As a risk-based regulator, we formulate our strategy and allocate our resources based on an assessment of the risks to achieving our statutory objectives. Our role is not to address every issue or to eliminate all risks to work-based pension schemes, but to strategically select cases and mitigate risks where our intervention will be most effective. 1 In this Corporate Plan, the term public service pension scheme refers to the schemes established under the Public Service Pensions Act 2013 and the Public Service Pensions Act (Northern Ireland) Although public service schemes are established as DB schemes primarily, references to DB schemes in this plan refer to private trustbased DB schemes only. 3

4 Foreword We are changing the cadence of our engagement across the range of our work to be proactive rather than reactive, to provide an authoritative voice and to share our knowledge and expertise in ways that promote better outcomes. The recent publication of our research into the costs of administering DB schemes to help trustees and employers compare the efficiency of their schemes among peers is an example of this. We plan to undertake a similar study later this year in respect of defined contribution (DC) schemes. We intend to place greater store in activities that help those with pension responsibilities to ask the right questions and so help themselves to do the right thing. Importantly, looking ahead and as we mature as an organisation, we intend to place an increased emphasis on our organisational efficiency and effectiveness. We will also review the way in which we operate, including the timing of our interventions and the way we measure our performance. As this plan will demonstrate, we are starting a journey to ensure that the measurement of our actions clearly relates to the achievement of the right long-term outcomes. The three years of this plan will cover our next public body triennial review and the Department for Work and Pensions (DWP) review of automatic enrolment. We were pleased to receive recognition of our strong governance arrangements as part of the January 2014 triennial review of pension bodies and we will look to build on this in preparation for the next review in We will continue to inform the regular DWP-led evaluation reports in the run up to the full review of automatic enrolment in 2017, to which we also hope to make a helpful contribution. We are sure that future action taken by our government, the EU, pension providers, advisers, scheme members and many others will ensure that our task evolves further. However, through continuing to work closely with our sponsoring department the DWP, other departments and financial regulators, and drawing on the growing expertise of the team at the regulator, we believe that we are well placed to rise to new challenges. Mark Boyle Chair, The Pensions Regulator May 2014 Stephen Soper Interim chief executive, The Pensions Regulator May

5 Executive summary The Pensions Regulator is the UK regulator of work-based pensions. We are a non-departmental public body established under the Pensions Act Regulatory approach We have a range of functions directed by six statutory objectives (see page 12) including our new objective, in relation to DB funding only, to minimise any adverse impact on the sustainable growth of an employer 3. As a risk-based regulator, we formulate our strategy and allocate our resources based on an assessment of priority risks in the context of our statutory objectives. We focus on those areas where our actions are likely to have the greatest impact. We aim to achieve compliance by educating and enabling those who have responsibility for pensions and by taking enforcement action where it is appropriate. The pensions landscape: issues and risks Both the memberships and assets of private pensions are currently concentrated within DB schemes, where 74% of assets (approximately 1 trillion) are held and which account for 12.7 million memberships. There are also currently more than 5 million memberships of work-based DC pensions. By 2018, the DWP estimates that there will be between 6 and 9 million people newly saving into pension schemes as a result of automatic enrolment. We believe most of these members will be in DC schemes and expect the assets currently in these schemes (around 400 billion) to more than double over the next 15 years. The government s strategy for work-based saving aims to increase the amount people are saving in pensions and the amount they receive, enable industry innovation, increase transparency and confidence, and ensure the UK system is sustainable. In particular, the pensions reforms announced in the March 2014 Budget are designed to boost freedom and choice for savers on retirement. Risk is a feature of pension provision. Although we cannot guarantee that all risks to member benefits are removed, we seek to ensure that members, trustees and others understand and manage the risks facing their schemes. 2 In this Corporate Plan, references to the law that applies in Great Britain should be taken to include corresponding legislation in Northern Ireland. 3 This objective is due to come into force in July

6 Executive summary Our research and analysis indicates a number of areas of concern in respect of governance and administration standards, particularly in smaller DC and DB schemes. Addressing these risks in DC schemes is especially important given that the vast majority of the schemes used for automatic enrolment will be DC schemes, where poor governance can more directly affect member outcomes. Key current risks relating to automatic enrolment include those around employers preparation for their staging date, especially in the case of small employers, and the potential for late payments to schemes. For DB schemes, the main risks relate to under-funding. Although the economy is beginning to recover, affordability remains an issue for many employer sponsors. A further key risk to pension schemes of all types is the growing level of funds inappropriately released through pension liberation or otherwise misused. Strategic plan For the period of this Corporate Plan, we have adopted four corporate priorities to guide our strategy (see page 27). They are derived from our statutory objectives and reflect the risks and challenges we expect to see over the next three years. To promote good governance and administration of work-based pension schemes We seek to improve scheme governance and administration by ensuring that those who govern schemes are aware of, understand and engage with the obligations and the standards set out in law and in our regulatory material. Our research and analysis indicates that standards in some schemes remain inadequate and, within the three years covered by this plan, we will review our strategic approach to increasing the quality and skills of those who govern schemes. In respect of DC schemes, we will continue to raise awareness of the core messages in our DC regulatory strategy, code of practice and guidance around good governance and administration, and promote compliance with the government s new quality standards. Regarding DB schemes, we will help trustees to gain an understanding of the overall risk facing their scheme by encouraging them to consider the areas of employer covenant, funding plans and investment strategy in the round rather than in isolation of each other. 6

7 Executive summary From April 2015, we will have an extended role in respect of public service pension schemes, with responsibility for regulating their governance and administration but not their funding. We will publish our strategy and code of practice for public service pension schemes in autumn We will also consult on a revised trustee knowledge and understanding code of practice and update the existing Trustee toolkit 4. Where we believe member benefits are at risk due to poor governance, we will consider taking enforcement action. To promote security and good outcomes for members of work-based pensions Our focus is to support the adequate funding and security of DB schemes, and help DC schemes to achieve good member outcomes. For DB schemes, we will employ a suite of risk indicators to inform our approach to assessing risk and use our annual funding statements to set out our views in relation to the risks facing schemes with effective valuation dates that year. To support employer sponsors to fulfil their obligations in respect of DB funding and also to achieve our new statutory objective to minimise any adverse impact on their sustainable growth, we will encourage trustees and employer sponsors to work together closely. To support DC schemes to deliver good outcomes, we will promote the practical guidance set out in our code of practice on risk management, investment (especially in default funds), conflicts of interest, adviser appointment and administration. We will also work with the Institute of Chartered Accountants in England and Wales (ICAEW) to support implementation of the voluntary assurance framework for master trusts and consider whether to build on this through voluntary assurance initiatives for group personal pensions and administrators. The Financial Conduct Authority (FCA) regulates providers of work-based DC personal pensions and we will support it in this task. The security of member benefits is increasingly threatened by pension liberation activity, potentially involving deception. Responsibility for tackling this issue rests with a number of government departments and agencies. Over the period of this plan, we will continue to raise awareness of the risks associated with pensions scams and pension liberation among those who govern schemes and work with government and industry partners to mitigate those risks. We will take a strategic approach to case work in order to tackle those liberation models and pensions scams that are new and pose a systemic risk to member benefits. We will continue to monitor work-based DC and DB schemes through scheme return analysis, thematic reviews and individual scheme risk assessment. Where appropriate, we will consider taking enforcement action. 4 Our online learning resource, the Trustee toolkit, which encapsulates the basics of trustee knowledge and understanding, is available free of charge to all trustees. 7

8 Executive summary To promote employer compliance with their pension responsibilities We will support employers to comply with their automatic enrolment duties and the employment safeguards by prompting them to prepare effectively and achieve particular milestones. We will also raise awareness and understanding through media campaigns, speaking engagements, webinars and industry liaison events. Additionally, to help ensure that employers receive well-informed and comprehensive advice as well as appropriate products, we will work with the external adviser market to improve knowledge and understanding around the legal requirements on employers. Given that DC schemes have, to date, been most employers choice of provision for automatic enrolment 5 and our expectation that this trend will continue, we will help employers to select quality schemes that, where relevant, meet voluntary assurance standards. We will also work with employers and providers to support the timely flow of contributions to schemes. We recognise the significant role that employer sponsors play in respect of DB schemes, and we will continue to provide tailored guidance to help them comply with their obligations. We will also engage with those schemes that present the greatest risk to member benefits. In line with our operational approach, where education and enablement activities are not successful or appropriate, we will consider taking enforcement action. To improve our organisational efficiency and effectiveness To ensure regulatory resources and activities are targeted where they can help us to meet our corporate priorities and statutory objectives, we are placing the pursuit of greater efficiency and effectiveness at the heart of our three-year plan. This includes the following elements: adopting a programme of continuous efficiency gains reviewing our operating model to enable us to fully utilise our skills and resources reviewing our approach to the performance management of our staff including measures to ensure the workforce can be deployed flexibly enhancing our approach to corporate planning, resource management and performance evaluation upgrading our core IT systems, including case management and document management. 5 Within the private sector. 8

9 Executive summary Additionally, we will continue to focus on the effective governance of strategic, operational and reputational risks, and develop our use of digital media. Business plan Details of our workload assumptions for , including our estimated caseload, are set out on pages We use key performance indicators (KPIs) as annual measures of regulatory interventions. We also monitor key outcomes on schemes, individuals and employers. Our KPIs are set out on pages Pages provide information on the resources required to meet our statutory objectives and corporate priorities during The funding of regulation is derived from two main sources: a grant-in-aid from the DWP which is recoverable from a levy on pension schemes and a separate grant-in-aid from general taxation. This arrangement gives rise to two separate budget heads: the levy budget and the automatic enrolment budget. We have controls in place to ensure there is no cross-subsidy between the two streams of funding. The levy budget for is 37.4 million and the automatic enrolment budget for is 40.4 million. As we have identified a need for substantial investment in IT reflecting a long period of under investment and a significant increase in both the volume and complexity of our work, we are also in discussion with the DWP in relation to additional funding. Subject to the approval of future business cases, in an initial 7.4 million tranche has been set aside by the DWP to start the process of essential IT infrastructure replacement. This funding is over and above the costs set out in this Corporate Plan and will be drawn down from the DWP following approval of the individual business cases. We are placing the pursuit of greater efficiency and effectiveness at the heart of our threeyear plan. 9

10 Introduction The Pensions Regulator is the UK regulator of work-based pensions. We are a non-departmental public body established under the Pensions Act Our sponsoring body is the DWP and Parliament sets the legal framework within which we regulate. We are responsible for regulating occupational DB schemes and occupational DC schemes, and for regulating limited aspects of work-based personal pensions. We are also tasked with maximising employer compliance with the employer duties and safeguards related to automatic enrolment into pensions. From April 2015, we will have an extended role in respect of public service schemes, with responsibility for regulating their governance and administration but not their funding. The Corporate Plan The Corporate Plan sets out our regulatory approach, the pensions landscape, our strategic plan for and our business plan for Regulatory approach This section outlines our statutory objectives; risk-based approach; operational approach of educate, enable, enforce; key audiences; making complaints; and performance evaluation. The pensions landscape: issues and risks This comprises an overview of the current landscape and a summary of the key issues and risks. Strategic plan This section sets out our corporate priorities and outlines our three-year strategic plans to achieve them. Business plan The financial year is covered here, comprising information on our workload assumptions, our KPIs and a summary of the resources we require to deliver our plans. 10

11 Introduction Other public bodies concerned with pensions In addition to central government departments, in particular the DWP, HM Treasury (HMT) and HM Revenue and Customs (HMRC), the regulator works alongside a number of other public bodies which have responsibilities regarding pensions. These include: Pension Protection Fund (PPF): The main function of the fund is to provide compensation for members of eligible DB schemes where the sponsoring employer becomes insolvent and the scheme is underfunded The Pensions Advisory Service (TPAS): TPAS provides information and guidance to members of the public on all pension matters, covering state, company, personal and stakeholder schemes Pensions Ombudsman: The Ombudsman has powers to decide on pensions complaints that affect individual members. It can also consider some issues from trustees or managers of pension schemes and participating employers European Insurance and Occupational Pensions Authority (EIOPA): The EIOPA is an EU authority set up to promote supervisory convergence and coherent application of regulatory standards across the EU, with a view to improving the functioning of the internal market for insurance and pensions Financial Conduct Authority (FCA): The FCA is the regulator responsible for the conduct supervision of all regulated financial firms and the prudential supervision of those not supervised by the PRA. This includes supervising the establishment, operation and winding-up of personal pension schemes Prudential Regulation Authority (PRA): The PRA is the prudential regulator for deposit-takers, insurers and designated investment firms. Some PRAauthorised firms provide work-based pension schemes to their employees and ex-employees, and some also offer financial products and services in support of work-based pension schemes Government Actuary s Department (GAD): GAD provides actuarial advice to the government and to a number of UK occupational pension schemes, including some of the largest pension schemes in the country. In particular, it advises many public service pension schemes, including the schemes for teachers, the National Health Service and the armed forces Money Advice Service: The Money Advice Service is an independent service set up by the government to help members of the public to manage their money, including retirement decisions. 11

12 Regulatory approach The regulator operates under statutory objectives set out in the Pensions Act These guide the exercise of our powers which are derived from a range of legislation dating from 1993 to Our statutory objectives are: 1. To protect the benefits of members of occupational pension schemes 2. To protect the benefits of members of personal pension schemes where direct payment arrangements are in place 3. To reduce the risk of situations arising which may lead to compensation being payable from the PPF 4. To promote, and to improve understanding of, the good administration of work-based pension schemes 5. To maximise employer compliance with employer duties and the employment safeguards 6. In relation to DB scheme funding only, to minimise any adverse impact on the sustainable growth of an employer. In undertaking our work we take account of the Regulators Code 7 and the principles of good regulation set out in the Legislative and Regulatory Reform Act That is to be: proportionate, accountable, consistent, transparent and targeted (PACTT). We track and evaluate our performance against these principles. We also operate within other relevant legislation, including the Human Rights Act 1998 and the Data Protection Act As amended by the Pensions Acts 2008 and This replaced the Regulators Compliance Code and it came into force in April

13 Regulatory approach Risk As a risk-based regulator, we formulate our strategy and allocate our resources based on an assessment of priority risks in the context of our statutory objectives. We categorise the risks we identify in terms of the threat they pose, the extent to which we can mitigate them and the regulator s willingness to accept risk. We focus on those areas where our actions are likely to have the greatest impact. Our risk appetite statement (see Appendix 1 on pages 56-58) is set and reviewed annually by the Board. It outlines how we balance risk and opportunity in pursuit of achieving our corporate priorities and statutory objectives. This forms a key element of our governance and reporting framework, and its use and effectiveness is monitored regularly by our Audit and Risk Assurance Committee. It also provides further information on how we categorise different types of risk, including external, operational and reputational. Through our information gathering, research capability and analysis of operational data and intelligence, we monitor the regulatory landscape to identify risks and emerging trends. Where appropriate, we proactively intervene to prevent these from crystallising or to minimise their effect. We work alongside other regulators and government agencies to share information on good practice and on risks of mutual interest 8. We do this through both formal, regular engagement and where required by particular circumstances. How risk links to our strategy, operations and performance measurement Identifying key risks in the pensions landscape (see pages 18-25) informs the basis for our regulatory strategy. To establish the main focus areas for our strategy, we analyse the key risks in the context of our statutory objectives and our expectations on how the risks will evolve over time. Subsequently, we determine which risks lie within our power to influence and what operational activities will enable us to effectively monitor or mitigate those risks. This, in turn, directs the allocation of our resources. Our KPIs (see pages 46-50) also reflect our key risks and provide measures of our regulatory performance in mitigating them. 8 Subject to legal constraints. 13

14 Regulatory approach Educate, enable, enforce Educate, enable, enforce is the operational approach we take to implement our regulatory strategy. Educate and enable Our programme of regulatory communications is focused on, first, educating our key audiences with regard to their obligations and our expectations. Secondly, we produce a range of materials and tools intended to enable trustees, employers and pension scheme managers, among others, to comply with their obligations. We use communications to drive behavioural change and use different channels over the course of our communications programmes. We evaluate our impact at each stage to monitor the effectiveness of our interventions. Our messaging evolves through the following phases: Awareness Understanding Engagement Action (the regulatory outcome). We use our media and stakeholder channels to raise awareness, and our web and direct channels to increase understanding and engagement. In keeping with the government s digital by default strategy, our primary point of contact is via our website at All of the materials we produce, including codes of practice, guidance, regulatory statements, reports under section 89 of the Pensions Act , and a variety of web tools, are available online. 9 Under s89 of the Pensions Act 2004 the regulator may, if it considers it appropriate to do so in any particular circumstances, publish a report of the consideration given by it to the exercise of its functions in relation to those circumstances and the results of that consideration. We produce s89 reports to educate and inform our stakeholders and with a view to increasing our regulatory transparency, among other matters. 14

15 Regulatory approach Enforce Where appropriate, we have a number of enforcement options available to us. Our core powers include: requiring employers to automatically enrol eligible job holders into a pension scheme and comply with their other employer duties and the employment safeguards requiring employers to fulfil their role in maintaining the flow of contributions into pension schemes in a timely manner requiring employer sponsors to put compliant funding plans in place for their DB pension schemes, and where there has been avoidance requiring the employer sponsor and those companies associated with the employer sponsor to support the scheme enforcing standards of trustee governance, including the appointment and removal of trustees, and securing assets where we consider they have been misused or misappropriated. Decisions to exercise our regulatory powers are taken by either those members of staff with delegated authority or, where powers are reserved 10, by the Determinations Panel, a committee of the regulator. Decisions can be referred to the Upper Tribunal. 10 The Pensions Act 2004 requires that certain decisions made by the regulator must be made by the Determinations Panel. The panel is a committee of the regulator but is separate from the case teams to ensure it can make its decisions independently and impartially, considering all the evidence before it from each party. 15

16 Regulatory approach Key audiences Each of the groups set out below has very different responsibilities and needs, and we tailor our communication tools and guidance accordingly: Trustees There are around 100,000 pension scheme trustees and they are pivotal in protecting member benefits and delivering good member outcomes. Many are lay persons, which sometimes introduces issues of capability and capacity. Our main focus for trustees is to provide a range of information to assist them throughout the lifecycle of a scheme. Employers Employers have a critical role in the establishment of work-based pension provision and in maintaining contributions to their scheme. Under their automatic enrolment duties, which commenced in 2012 for the largest employers, approximately 1.35 million employers must select a pension scheme which meets the qualifying criteria 11 and pay contributions to that scheme. Employers also have a key role to play in supporting the DB schemes they sponsor and in choosing a good DB or DC scheme for their workers. We provide guidance and tools to help employers comply with their obligations. Public service scheme managers and pension boards The law requires that a scheme manager must be identified for each new public service scheme to be responsible for managing or administering the scheme and provide for the establishment of a pension board to assist the scheme manager. Our educational focus is to build a new toolkit to help them meet their responsibilities. Intermediaries and payroll providers Intermediaries and payroll providers are third parties who offer advice, information and services to employers and trustees in relation to pension provision or, in the case of employers, their automatic enrolment obligations. They have a high level of influence over employer and trustee behaviour and play a key role in supporting them with their existing and new duties. We work with representative stakeholder bodies to provide them with tools to assist their members in understanding the evolving regulatory environment. 11 See our interactive beginner s guide to automatic enrolment at 16

17 Regulatory approach Pensions and administration providers Pensions and administration providers should deliver products that enable members to receive a good outcome from their savings. We will continue to work with them closely to promote the provision of quality schemes and to improve standards of administration, including record-keeping. Individuals We have direct contact with individuals on a number of issues. These include whistleblowing, pension liberation, member charges, retirement decisions and maintaining contributions. On other matters, we work closely with a range of public bodies, including the DWP, TPAS and the Money Advice Service (see page 11), to provide guidance and information to individuals and to raise awareness of important pensions issues. As automatic enrolment moves forward, we will continue to review our materials aimed at small and micro employers, including how we can support them in communicating with their individual employees. Making complaints If those we regulate or related individuals are dissatisfied with the way in which we have made decisions or the service they have received from the regulator, we operate a two-stage formal complaints process 12. We can deal with any complaint about the way in which we have carried out, or failed to carry out, our role. This includes complaints about mistakes or lack of care, unreasonable delay, unprofessional behaviour, bias or lack of integrity by the regulator and its staff. The Parliamentary Ombudsman can also investigate complaints against the regulator. Normally the Ombudsman will only accept a case if our internal complaints procedure has been exhausted. Performance evaluation We seek to continually improve our performance. The Board and senior management team review the regulator s performance on a regular basis and take action to ensure we achieve our targets. Where necessary, the senior management team makes recommendations to the Board regarding emerging risks to achieving our Corporate Plan and how to resolve them. We also set KPIs which are reviewed and updated annually. Our KPIs are set out in this plan on pages View full details at complaint 17

18 The pensions landscape: issues and risks Landscape Our powers apply to both private pensions and public service pensions. We are concerned with four main types of private work-based pension products: DB (trust-based), hybrid (trust-based), DC occupational (trust-based) and DC work-based personal pension (contract-based). The work-based pensions landscape, summarised in the table below, also includes public service schemes where the local government pension schemes (LGPS) are funded but the others operate on a pay as you go basis 13. Private schemes Public service schemes Current landscape DB Hybrid DC trust DC contract Unfunded LGPS Schemes 5,530 1,380 37,690 2, Memberships 7.8m 4.9m DB 1m DC 1.7m 2.7m*** 8m 5m Assets 1,118.5bn* 270bn** 115bn** N/A 211bn**** Sources: The pension register, The Pensions Regulator January 2014 except: *The Purple Book, The Pensions Regulator and PPF March 2013; **Pensions in the national accounts, Office for National Statistics (ONS) April 2010 (includes 110 billion of decumulated assets); ***Annual survey of hours and earnings, ONS 2012; **** LGPS annual reports Both the memberships and assets of private pensions are currently concentrated within DB schemes, where 74% of assets are held and which account for 12.7 million memberships. Although the majority of DB schemes are now closed to new members there are more than 4,000 private pension schemes where new DB pension rights are being accrued. DB schemes hold overall assets of over 1.1 trillion and the value of the pension benefits on a buy-out basis currently amounts to more than 1.8 trillion. The proportion of private DB schemes open to new members remained broadly constant between 2012 and 2013 at 14%. 13 The table above reflects the schemes that will be public service schemes under the Public Service Pensions Acts. There are other funded and unfunded public body schemes which may or may not become public service schemes in due course but these will not materially affect the figures in the table above in terms of either memberships or assets. 18

19 The pensions landscape: issues and risks Figure 1: 2013 distribution of DB schemes by status 14% 2% Closed to new members but open to future accruals of existing members: 3,326 (54%) Closed to future accruals: 1,868 (30%) Open: 841 (14%) Winding up: 115 (2%) 30% 54% Even closed DB schemes are expected to have obligations that project over the next 60 years and beyond, as illustrated by the chart below 14. See page 22 for details of the risks arising from the maturing of DB schemes. Figure 2: Estimated cash outflow from DB schemes 60 Current status: Deferred bn (constant prices) Active Pensioners Our estimates as shown are for illustration only, based on data reported by UK pension schemes and a number of assumptions. In particular, the estimates assume that all schemes are closed to future accruals and all members commute 20% pension at retirement. 19

20 The pensions landscape: issues and risks By 2018, the DWP estimates there will be 6-9 million members of pension schemes who have joined due to automatic enrolment. DC schemes have, to date, been most employers choice of provision for automatic enrolment and we expect this trend to continue, with a particular increase in the membership of multi-employer master trusts and group personal pensions. Although it will be a number of years before DC schemes hold as many assets as DB schemes, the chart below illustrates the significant increase in DC assets from the current figure of around 400 billion that we expect to see through to Figure 3: DC assets forecast 1,200 DC scheme assets (assuming retirement at 65) bn (constant prices) 1, Our projection as shown is for illustration only, based on internal modelling and assumptions. It is determined by, among other things, rate of retirement, investment return, and contributions from existing and future DC scheme members. 20

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