TPR reminds smaller DC schemes to prepare for VFM changes

Smaller defined contribution (DC) pension schemes have been reminded by The Pensions Regulator (TPR) to prepare for a more rigorous value for money (VFM) assessments in line with regulations coming into force with effect from October.

Under the regulations, trustees of DC pension schemes with less than £100m in assets must compare their scheme’s costs, charges and investment returns against three other schemes, and must also carry out a self-assessment of their scheme’s governance and administration.

The schemes will then have to report the outcome of this assessment in their annual chair statements, and provide findings to TPR in a scheme return.

If trustees fail to demonstrate their scheme offers value, they will be expected to wind up, and must explain why and what steps they are taking to ensure their scheme does offer value if they do not propose to do this.

In light of the upcoming changes, TPR has updated its guidance, including the value for members guide, in order to help schemes prepare for the new assessment.

The Pensions Regulator (TPR) executive director of regulatory policy and advice, David Fairs, commented: "The success of automatic enrolment has seen more people than ever before saving into defined contribution pension schemes.

"These millions of savers should benefit from the best retirement outcome possible. To ensure this, savers must not be left languishing in poorly governed schemes which do not offer the same value as larger schemes.

"Where smaller schemes are not able to demonstrate they provide this value it’s right they either wind up or take immediate action to make improvements."

The Department for Work and Pensions (DWP) also previously published statutory guidance on the upcoming changes in June, confirming that trustees would need to publish net returns as part of their chair's statements.

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