The influence of the general election, changes to regulation, and ongoing challenges with auto-enrolment are some of the issues facing the industry for 2015, according to experts across the sector.

The unpredictable outcome of the UK general election in May, particularly with the emergence of fringe parties both at home and in Europe, mean policy change is an unknown quantity.

Steven Bell, chief economist at F&C Investments and co-manager of the F&C Global Macro Bond Fund, explained:

"The government that is likely to emerge after the UK general election, and the policies that result, are highly unpredictable – and this is likely to cast a shadow over UK markets," he said.

However, Trevor Green, head of institutional equities at Aviva Investors, said the trend for underperformance in the retail sector in the run up to a general election could lead to opportunities.

"If the last five elections are any guide, the sector has underperformed in the run up to the election, then rebounded the month after," he said.

"Obviously this time it may be different, but we are mindful that pre-election market volatility could create some worthwhile buying opportunities."

Some changes to regulations are already underway and have the potential to reshape the financial landscape for pension schemes.

Fiona Southall, pensions and insurance strategist at AXA Investment Managers, highlighted three game-changing regulations to watch.

First, IORP II, the European directive affecting occupational pension plans, will finalise the rules on governance and transparency this year.

A similar consultation from the European Insurance and Occupational Pensions Authority (EIOPA) is considering whether pension funds should be subject to capital requirements or minimum funding requirements.

Second, the continued implementation of EMIR (European Market Infrastructure Regulations) which may impact pension schemes that use over the counter (OTC) derivatives.

And third, bank regulation, such as MiFID II, which is designed to improve pre- and post-trade transparency but will impact dealer inventory and reduce liquidity in credit markets.

"For pension schemes, these regulatory changes will introduce additional operational processes and reporting requirements and impact the day-to-day functioning of financial markets," said Southall.

"These changes underscore the importance of supporting investment decisions with an effective governance process."

Auto-enrolment is set to continue to cause concern, particularly for smaller firms, which may have little understanding of what is required of them.

Vanda Cox, director-corporate benefits at Broadstone Group said: "I think there will be a number of companies that will take a relaxed attitude to automatic enrolment or fail to understand the complexities and actions required.

"Until now the Pensions Regulator has been hesitant in issuing fines because it was keen to make AE a success, but I think its stance is hardening."

The Pensions Regulator consulted at the end of last year under four criteria and aims to establish a list to help employers staging in 2015 as quickly as possible.

First published 08.01.2015

Lindsay.sharman@wilmington.co.uk