Participant outcomes have "got to be at the forefront of anything from a consolidation perspective," Kenneth added.
The potential for the PPF — the lifeboat fund for the pension plans of insolvent U.K. companies — to become a consolidator is currently under consultation by the government, which published a comment paper Feb. 23.
"I think a lot of the questions that are in that consultation are trying to tease out some of the key design questions that we will have to answer in order to provide executable solutions" that hopefully play to the PPF's skill set, Kenneth said.
On the defined contribution side, "I happen to believe that good governance generates better member outcomes," said Julius Pursaill, strategic adviser at master trust Cushon, London, which has £2.3 billion in assets. "Throughout most of my career, DC governance has been the poor relative and, in my view, good DC governance is actually at least as intellectually demanding as DB (defined benefit) governance — I'd go further and say that it's more demanding."
Better governance might manifest itself in terms of better investment outcomes, more sophisticated accumulation-phase investment strategies — including private markets and co-investments, which Cushon already has in place — and "equally so, in decumulation, we need to see more innovation, far more sophisticated investment strategies to deal with things like longevity," Pursaill said.
Then there's technology, which is "very, very expensive. We're just at the beginning of what my boss likes to call the 'Amazonification' of financial services — pensions are quite a long way behind the vanguard of the Amazonification, but it is coming. And the scale of investments that's required in order to deliver an Amazon-like app-based experience for DC members with personalized content prompts, which genuinely drive better outcomes, it's very large indeed. And you will not get that without consolidation," Pursaill added.
Universities Superannuation Scheme, London, which had £73.1 billion in defined benefit assets and £2.2 billion in defined contribution assets as of March 31, is a sectorwide scheme that is "arguably a form of consolidation," CEO Carol Young said. "And what that scale gives you is … a bit of a downhill run, because you've got the size, you've got the scale, and you've got the skills. And those three things together are really important to generate member outcomes that are positive."
But what shouldn't be lost sight of is that USS and other plans in Canada and Australia, for example, "also have a connection of purpose. They're set up usually for a state or for a sector. And I think if consolidation is to come, then how do we replicate what our schemes benefit from, which is there's still a connection to employers, there's still a connection to members, members have an ability to organize as a group. If we move into consolidators that don't have those automatic threads, it places an even greater responsibility on trustees to make sure that they're truly member-focused," Young said, speaking on the same panel.
Pursaill added that Cushon's smaller size is proving to be a positive in terms of finding "some sweet investment spots" as he works with other, larger retirement plans that are interested in natural capital. Cushon is currently searching for a natural capital manager "and interestingly, I had no difficulty with my Cushon hat on, trying to find managers who want to grow the size of the investable universe with Cushon, and they can grow the size of the investable universe in line with our cash flows. That's very exciting to them." By contrast, the larger client is "finding it very, very hard to get scale. So ironically, actually, the small size … is not unhelpful in the context of some growth markets," Pursaill said.
