27/10/2009
By Sophie Baker
A third of literature dished out to pension scheme members is in breach of legislative requirements, or shows signs of poor practice, according to the results of an investigation by The Pensions Regulator (TPR).
Research completed by the regulatory body found that of those assessed, issues such as sending out material to members too late, or not offering all the options such as to shop around, prevail, meaning that members could be making uninformed decisions. When it comes to trustees, TPR said it is important they meet legislative requirements and where possible get beyond compliance in their duty to do the best for their members.
Of the 97 schemes that submitted literature for consideration, TPR found that 98 per cent offer the Open Market Option (OMO), although take up remains low at 23 per cent of defined contribution (DC) members retiring. Over half (57 per cent) had scope for improvement in the standards of the information sent out to members, and 30 per cent had alleged legislative breaches of retirement disclosure regulations. On top of this, six per cent have been referred to regulator casework teams to follow up the substantial changes required in their literature or processes.
A letter will now be sent out to 4,500 schemes to highlight the findings of the investigation and to encourage trustees to review the pre-retirement literature administered to members.
"Compliance with the legislative requirements is important as a minimum standard," commented June Mulroy, The Pensions Regulator's executive director of operations. "But we expect to see adoption of good practice as the norm. This will help members to make the right decisions at retirement, which we recognise can make a significant difference to the income they receive.
"It is encouraging to see examples of excellent practice, but we do recognise that there is room for improvement. The economic downturn has had an impact on the value of many DC members' pension savings and as such the importance of making informed decisions is higher than ever."
The research is published as part of TPR's ongoing campaign which aims to increase the support and guidance offered to members in DC schemes by improving standards in administration and governance across this market.
International law firm Eversheds' Terry Saeedi, pensions partner, added: "Until now the Regulator's main focus has been the regulation of defined benefit pension schemes. As the number of members of defined contribution schemes continues to grow, it is right that the Regulator increasingly focuses on the regulatory issues which defined contribution schemes raise. We welcome the fact that the Regulator is starting to look at the particular issues relating to these schemes."
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