The new Pensions Minister, Paul Maynard, has said that the government is aiming to shift the pension industry's focus “unambiguously” from cost to value.

Speaking for the first time in his new role at the Professional Pensions Investment Conference 2023, Maynard argued that while the pensions industry is a growth industry, a "significant transformative shift in the market” is needed.

“We want to shift the focus of trustees, managers, and employers unambiguously from cost to value to boost returns in and throughout retirement, and increase the opportunities for investment in productive finance assets," he said.

"Through this, we can benefit the UK economy and also give everyone a better chance of meeting their aspirations over the course of their retirement."

Maynard suggested that the pension reforms announced as part of the Autumn Statement will be key to this, acknowledging however, that there are challenges to address, identifying the “three biggies” as: value, trust and growth.

"Many employers are still choosing their pension schemes based on convenience and fees, but investment returns need to be factored into these decision as they are critical to long-term outcomes," he explained.

"We need to look at more opportunities to invest in productive finance, supporting the UK economy and boosting member benefits. In the defined benefit (DB) market alone £1.4trn of assets can be put to work for members and the economy.

"So our reforms confront these challenges and help improve retirement outcomes."

Maynard also reiterated the government's commitment to implementing the 2017 auto enrolment (AE) reforms, confirming that the Department for Work and Pensions (DWP) intends to carry out the consultation on how to implement these changes "at the earliest opportunity".

Creating value for money

However, he argued that, alongside further AE reforms, "we have to see a shift in the market towards an emphasis on value, focusing on overall value and return for members", warning that "for too long, short-termism and low costs have dominated decision-making".

In light of this, he said that the proposed Value for Money (VfM) framework will help "increase compatibility, comparability, transparency and competition across all DC schemes".

"We’ll also make sure the regulators have the power they need to tackle consistent underperformance, meaning savings don't get trapped in poorly performing schemes," he added, highlighting the recent regulatory update on the proposed framework as affirmation of the government's commitment in this "vital area".

Addressing the small pots issue

Maynard suggested that the government's plans for a multiple default consolidator approach would also help drive value by tackling the small pots issue, estimating that bringing members eligible deferred pots together into a high-quality scheme could benefit the average saver by £700 at retirement.

However, he acknowledged industry concerns around these proposals, admitting that "it is a complex and challenging policy to implement.

"So my aim is that this will support development of viable and cost-effective automated consolidation processes that ensure the member interests, as they always should, come first" he stated.

Maynard said that this will also be accompanied by a "robust regulatory regime", calling for a "more assertive and influential regulatory approach guiding meaningful behaviour change in those looking after savers assets."

Getting the regulatory background right

This, according to Maynard, should start with the regulators being "absolutely clear" about the primacy of investing for good returns in their supervisory and enforcement approach.

He also emphasised the need to ensure that the regulatory environment for master trusts is future proofed, noting that, by 2030, 80 per cent of trust-based members are expected to be in the five largest master trusts.

"Building on the work done by Mary Starks, we will work with TPR to propose a different approach to supervision using existing powers - that includes investigating investment decision making, demanding greater transparency scheme when it comes to investment strategies and raising standards of trusteeship," he said.

Maynard confirmed that he also met with TPR chief executive, Nausicaa Delfas, to discuss this work, stating that he was confident these changes will drive up performance and protect member outcomes.

Decumulation was another key area identified by Maynard, as he acknowledged that savers are often left to make they may not understand what being equipped to make, having seen evidence of this in his own constituency surgery.

In addition to the government's plans for decumulation framework, Maynard suggested that collective defined contribution (CDC) "could be a potential access option by schemes".

"Note the conditional tense there," he added, acknowledging that CDC's are new, but that the government is committed to working with industry to facilitate their expansion, with a consultation on CDC expected in early 2024.

Looking to the industry

Alongside the Mansion House reforms, Maynard said that he was looking to prioritise work on pension dashboards, stating: “I want to make sure that we get dashboards right.

"It's so critical as we can't really deliver a lot of Mansion House without successful dashboards, so that will get much more of my attention."

More broadly, Maynard emphasised that he will be looking to the industry for support, stating: "Mansion House is going to be fundamental to what [the industry] are going to be doing in the years to come and they have to get it right.

I am not an expert so I'm gonna need your help. We do the [consultations] for a reason. This is a technical field and I think the benefits you can make in this country are massive

"This isn't just about pensions, it's about the country as a whole. It's about changing that productivity dial that everyone always frets about, and there is so much we can do."

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