Reinvention was the overarching theme of the Pensions and Lifetime Savings Association's annual conference, as delegates and experts came together to discuss the major issues affecting the retirement industry.
Delegates gathered in Liverpool, England, to hear about the association's work in reinventing defined benefit funds through its own task force, which unveiled its interim report. The reinvention of Europe following the U.K.'s vote to leave the European Union was a topic mentioned in almost every session across the three-day conference. And the reinvention of multiple-employer defined contribution plans — known as master trusts — was a key issue discussed throughout the conference.
The issue of DB fund deficits in the U.K. has worked its way back into the headlines over the past few months, with companies revealing their struggles with funding shortfalls. The PLSA's DB task force, launched in March to consider solutions to the problems that defined benefit funds and their sponsoring employers face, presented its interim report Oct. 20.
Launching the report and talking through its findings, Ashok Gupta, chairman of the task force, said: “Lest we forget, DB is still an enormous force for huge social and economic good. And it matters enormously today and it will continue to matter for decades to come.”
Mr. Gupta said the defined benefit industry is a “key provider to capital markets, and through capital markets to the U.K. economy. The sector invests £1.5 trillion ($1.8 trillion), a figure that has doubled over the last decade. It owns 80% of the U.K. index-linked gilt market. It is a big owner of U.K. infrastructure, a growing owner of U.K. infrastructure, and wants to own more. And a well-functioning DB sector is a crucial driver for all parts of the U.K. economy.”
Mr. Gupta said the task force concluded the DB system is “not working as it should — the sector has problems.” But the industry needs to reinvent the way it thinks about these issues. “(These are) not problems you can understand just by looking at deficit numbers — big and scary and wildly fluctuating as they may be. We believe you have to start from what really matters — the risk to members' benefits,” he said.