DC consolidation not always in members' best interests, warns PLSA

The Pensions and Lifetime Savings Association (PLSA) has cautioned that consolidation or scheme scale should not be "an end in and of itself”.

The warning, which came as part of the organisation’s response to the Department for Work and Pensions’ (DWP) consultation on improving defined contribution (DC) scheme members’ outcomes, included the claim that quality could include scheme benefits and guarantees that are available to members in smaller schemes.

Its response stated: “Though we agree that there can be benefits to scale in terms of governance, access to expertise and availability of particular investment approaches, it is quality – and not the size of the scheme – which matters.”

The PLSA also called for further clarity and guidance on how schemes should ensure that the views of their sponsors and members are taken into account when making decisions about winding up or consolidating.

In order to help calculate how schemes offer value for money, the organisation also agreed with proposals for additional reporting of net returns to help members and schemes make comparisons, though it called for this to be expressed in a “meaningful and readily understandable way”.

“The government should also design requirements for net returns that are based on information easily accessible to schemes, reflect the purpose for which the reporting is intended, as well as with appropriate flexibility – in for example, time horizons - for the circumstances of different investments,” said the PLSA’s response.

PLSA head of DC, master trusts and lifetime saving, Lizzy Holliday, commented: “The PLSA welcomes the government’s intention to provide greater clarity for scheme trustees around how to conduct value for members assessments – and to put this guidance on a statutory footing.

“Where schemes are not currently able to demonstrate they are delivering good value, they should act to improve rapidly and cost effectively.

“However, the PLSA cautions that the proposed methodology for assessing value has limitations that may lead to some schemes pursuing consolidation that is not in the best interests of their members. Consolidation or scheme scale should not be an end in and of itself."

    Share Story:

Recent Stories


Making pension engagement enjoyable through technology
Laura Blows speaks to Nick Hall, business development director and Chartered Financial Planner at UK-based Wealth Wizards about the opportunities that technology provides for increasing people’s engagement with pensions and increasing their retirement wealth. Please click here for an edited write-up of the video

ESG & DC – creating the right tools
In the latest of our series of Pensions Age video interviews Francesca Fabrizi, Editor in Chief of Pensions Age is joined by Manuela Sperandeo, Head of Sustainable Indexing EMEA, BlackRock and Mark Guirey, Executive Director, Asset Owner and Consultant Coverage - MSCI to discuss some key trends of ESG investing among UK pension funds today. Please click here for an edited write-up of the video

Savings and finance at retirement
Laura Blows is joined by Claire Felgate, Head of Global Consultant Relations, UK, at BlackRock, to discuss savings and finance at retirement. Please click here for an edited write-up of the video

Global sustainable credit
Laura Blows speaks to Royal London Asset Management senior fund manager, Rachid Semaoune, about global sustainable credit
Global equities and transition investing
Pensions Age editor, Laura Blows speaks to Royal London Asset Management equity investment director, Jonathan Price, about transitioning to sustainable investments within global equities

Advertisement Advertisement Advertisement