TPR plans to use 'comply or explain' approach to ensure high quality DC

The Pensions Regulator (TPR) has today outlined how it plans to encourage auto-enrolment into high-quality pension products, thus helping employers to turn away from poor value schemes.

Speaking at the NAPF trustee conference, TPR chair Michael O’Higgins stated that the regulator plans to invite views on a voluntary ‘comply or explain’ approach which could potentially involve schemes disclosing to employers, retirement savers or the regulator how they are to implement the regulator’s six principles and features for its DC schemes – or to explain why they do not.

Higgins warned that small DC schemes not benefiting from economies of scale and older legacy schemes with higher administration costs levied on members’ pension pots should not be used by employers to auto-enrol.

“The number of people saving into DC pensions is set to increase enormously as a result of automatic enrolment. The best outcome is to be auto-enrolled into high-quality, value for money schemes, benefiting from scale and good governance.

“We also don’t want to see auto-enrolment into legacy schemes operating on old administration platforms with higher charges and outmoded default funds; or into schemes that require a higher level of financial literacy such as Self-Invested Personal Pensions (SIPPs) or Small Self-Administered Schemes (SSASs). The latter would put workers in the position of being the trustee of their own scheme.”

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