The pensions industry kicked of the year with a bang, as industry figures including pensions ombudsman and pension protection fund (PPF) ombudsman, Anthony Arter, alongside Redington co-founder, Dawid Konotey-Ahulu, and former Investment Association chair, Keith Skeoch, were recognised in the King’s first New Year Honours List 2023.

But now that the Christmas decorations have been put away and the fireworks have finished, the return to work for the new year has begun, with many in the industry using this time as an opportunity to take stock of the current standing of the pensions market.

This has meant an encouraging start to the year, as various industry trackers revealed funding improvements across the defined benefit (DB) space, with analysis from XPS Pensions Group revealing that the aggregate funding level of DB schemes improved by around £400bn over the course of 2022.

Broadstone's second Sirius Index update also revealed that market stability through November and December saw both hedged and unhedged schemes’ funding levels steadily improve and reduce deficits after prior months of significant volatility.

Scheme sponsors have been urged to take proactive action in light of these funding improvements, with LCP suggesting that 2023 will be a "pivotal year" as many schemes are in their healthiest position yet.

These funding improvements are also expected to prompt a surge in the bulk annuity market, with a record buy-in and buyout volume already predicted for 2023.

However, industry experts have suggested that trustees may need to work harder to prepare amid this increased demand, with Aon suggesting that plans to deal with asset transition within an insurance transaction will be "vital" in 2023.

Following the liquidity issues faced by DB schemes in 2022, Hymans Robertson also stated that collateral sufficiency, including creating or revisiting a liquidity waterfall, will be a “key priority” for pension schemes in 2023.

The rising cost of living has remained a concern, however, with research from the Pensions Management Institute (PMI) revealing that one fifth of savers have reduced or stopped their pension contributions over the past twelve months.

The research also revealed that a further 20 per cent are considering cutting their pension contributions over the coming months, with the PMI warning that this could increase further, as the cost of Christmas and higher energy bills are felt.

However, with the new year presenting new opportunities, this may be an opportunity for the pensions industry to 'rise to the challenge', as former Pensions Minister, Baroness Ros Altmann, argued that more positive messaging could help prevent individuals from opting out amid the cost-of-living crisis.

And industry experts have already taken steps in some key areas, with many looking to raise awareness of the importance of considering pensions within divorce settlements ahead of 'divorce day' on 9 January.

The year ahead is set to be another busy one for the pensions industry, with our year ahead series taking a closer look at the key priorities in the legal, administration and investment space for 2023.

And with pensions dashboards, shifting investment strategies, and a stream of legislative changes expected for the year ahead, hopefully the industry is well-rested after the holidays, and ready to hit the ground running.

Share Story: