Debunking the myths of moving pension arrangements

There are several misconceptions when it comes to moving a DC pension scheme arrangement

Myth 1: Pension providers all offer the same thing

In reality: Providers all have something different to offer.

Master trust arrangements and contact based arrangements are similar in that they need to meet regulatory requirement set by the Pensions Regulator and Financial Conduct Authority.

But beyond this, it’s down to the provider to set a strategy on how they are going to provide value for members. That could be through the use of targeted communications and technology to drive member engagement, through to the design of their default investment strategy or through to the access members have to advice and guidance in the lead up to retirement.

So what providers offer, and the quality of these offerings, can differ quite significantly. This is a good thing as employers can pick a provider that best aligns with their objectives and best meets members needs.

The pensions market is continually evolving as providers develop their offerings to stay competitive, driving innovation and competitive pricing.

Myth 2: Once you’re in a master trust or GPP arrangement, you shouldn’t need to change your provider

In reality: You can change from one arrangement with an existing provider to another arrangement with a new provider and sometimes this will be the right thing to do.

In recent years many schemes have moved from being within a GPP arrangement to a master trust arrangement. While master trust to master trust moves have not been commonplace in the pensions market to date, that is expected to change in the next few years.

Since automatic enrolment requirements were introduced in 2012, many employers have set up DC schemes in GPP or master trust arrangements, but may not have reviewed the arrangement for some years and checked that it still delivers value.

Both the master trust and contract based market have changed a lot since then and pension providers are constantly developing their offerings to stay competitive in a continually evolving pensions market.

It’s good practice for employers to review their provider every three years to make sure they continue to align with their objectives and best meet the needs of their members.

Myth 3: It’s time consuming and complex to change to a new pension arrangement

In reality: Changing pension providers can take as little as three months and most of the work for setting up the new arrangement is done mainly by the provider. Employers should allow a little longer, but six to nine months is absolutely sufficient.

One of the key parts to changing to a new pension arrangement is communicating and, in some instances, consulting on the change with members. The providers will often support these communications and work with employers to develop a strategy that dovetails well with any wider corporate communications.

If you’re also considering other changes within your business, for example, to your workforce, pension scheme design (contribution or investment), integrating a new payroll system or financial wellbeing support, it might be more efficient to consider any changes to pension provider at the same time.