Fully merging DB assets and liabilities into superfunds is "impractical and unrealistic", according to most respondents in last week's Pensions Buzz.
92 respondents were also asked whether they support the government's view that DB is affordable for most employers, and if the regulator's settlement on BHS proves it had enough powers to do its job. We asked the industry if the government was right to stop NEST from entering the drawdown market, and whether the death knell is already sounding for the LISA.
More than 60% of respondents said merging defined benefit (DB) assets and liabilities into single-sponsor superfunds is not the best way to achieve consolidation.
Many argued it would be extremely complex to set up, and too impractical and unrealistic, with some contesting the view that DB schemes should be consolidated.
One said: "How could this possibly work without equalising funding? Scheme mergers of DB schemes are very complicated and cost and effort often exceeds the benefits. Orphan liabilities and ongoing funding would still be issues to be resolved."
Another pointed out that DB master trusts seem the "most sensible" approach: "Superfunds have a big issue of who would pick up the tab if it went wrong and can see difficulties with harmonising benefits."
However, a quarter of respondents agreed with the concept, arguing it would be particularly helpful for small schemes with high administration costs and governance challenges.
One called it a "great idea" that would simplify the benefit structure and achieve economies of scale.
Although, respondents said it should not be compulsory as some would be better left alone.
Just over half agreed that DB schemes are affordable for most sponsoring employers, with many arguing only a minority of firms struggle.
Some said the problem lies in the current way of valuing liabilities, which makes DB look more expensive due to the low yield environment.
One said: "It depends on the valuation methodology. Schemes should be funded on a budgeting approach, which allows for expected investment returns on assets held, assuming the employer survives, not on a 'full market to market collateralisation of guaranteed cash flows' basis. Effectively DB pensions are not absolutely guaranteed."
Another said DB schemes are affordable if funded properly, and not over-prudently.
The issue of valuating liabilities was also raised by some of the 37% who disagreed that DB is affordable for most employers.
"Based on current funding requirements the 'promises' made many years ago are often no longer sustainable. Look at recent cases - the answer is quite clear," said one.
Another pointed out that while DB is affordable for the largest FTSE350 employers, smaller employers are struggling.
Almost half of respondents said they believe the watchdog's settlement on BHS proves it has enough powers, after it came under heavy criticism last year.
One said: "BHS was initially a publicity disaster for the industry but the TPR action shows there is a reason for faith in what we do."
However, some argued the situation was helped by the big media campaign against Sir Philip Green - with one saying "this wouldn't happen with most employers".
Others said it is really a case of TPR needing to use its powers more effectively, rather than get new ones.
One said: "It needs to flex its muscles more convincingly and take responsibility for allowing a situation to deteriorate before intervening."
Conversely, 32% said the regulator needs more powers on the basis that the current regime needs to work better, and that it could have gotten more money out of Green.
One said: "It just shows that the current regime is too weak. Move it under a corporate affairs matter rather than trust law and things would be more tightened."
Almost 60% praised the government for not allowing NEST to enter the drawdown market, after the proposal had concerned many in the industry.
Respondents said it would have been too complicated and would change what the government-backed master trust was set up to do.
One said drawdown should not be encouraged as a mass-market solution, while another said "it seems a step too far".
"The future is not looking good for drawdown and this is a sensible decision," said one. "It is difficult to believe that any sound government would get mixed up in this one way ticket to poverty for a large proportion of members."
However, some argued there is no evidence of market failure in drawdown as of yet.
A fifth disagreed with the government's decision, saying competition is good and called for more choices in drawdown.
One said: "If that is the most efficient solution, then it should be allowed. The commercial interests of other providers are of little importance."
Another noted: "Market needs an innovation leader and NEST members need access to quality drawdown offerings."
Respondents were heavily divided by this question, with a small majority (37%) optimistic about the LISA's future despite just one provider being ready to offer it by the launch date.
They said it would take time for potential providers to figure out the actual demand, and that many are taking a ‘wait and see' attitude.
One said: "The LISA is the future for savings. It will take time for the market to adjust. New offerings need positive experience to be forthcoming before testing the water."
Another said: "The LISA is a viable, alternative savings option that some in the pensions industry are overly critical of, their future income being more reliant on extending pensions coverage. It will produce better outcomes than a de minimis AE scheme."
However, 30% were pessimistic about the product's future, and some even hoping it would fail. One said they hoped "another of George Osborne's ludicrous ideas might bite the dust".
Another said: "The pensions rules should adopt some of the more attractive features of the lifetime ISA, but the LISA itself should be quietly buried."
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