Smaller DC schemes not demonstrating value for money, TPR says

Many smaller defined contribution pension schemes are not demonstrating that they are providing good value for members, according to new data provided by The Pensions Regulator (TPR).

The annual DC trust-based pension schemes research survey found that only one in 10 small schemes are doing everything that TPR believes is essential to access value for members. This includes trustees having good knowledge and understanding of the costs and charges paid by members.

Additionally, just a third of medium-sized schemes are doing everything to access value for members, highlighting the need to improve the value provided by smaller DC pension schemes and for trustees to carry out an annual assessment of the value the scheme represents.

TPR executive director of regulatory policy, David Fairs commented: “Poor value for members is a key risk which needs to be managed. Any small schemes unwilling or unable to assess value for members should seriously consider if members would be better off being moved to a bigger scheme which benefits from economies of scale.”

TPR’s research also found that only 41 per cent of scheme trustees are researching and taking into account what members value. It also discovered the extent of the problem in small and micro DC schemes, as the majority of the 68 chair statements reviews provided inadequate or incomplete explanations on how the schemes costs and charges represent good value for members.

Fairs continued: “It is essential that members get the benefits they deserve from their pensions. Assessing value for members enables trustees to identify and address poor performing areas, in turn making a scheme more likely to provide good outcomes for pension savers.”

Just 14 per cent of small and 19 per cent of micro schemes were meeting TPR expectations, while less than a quarter of investment governance scheme trustees were meeting its expectations.

In order to address these issues, TPR is: reviewing its guidance to be clearer about its expectations of chair statements, trying out a more directive approach to providing guidance, continuing to take action against schemes with unsatisfactory chair statements and using its 21st Century trusteeship communications to people who run schemes to help improve standards.

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