06 July 2023
The Pensions Regulator (TPR) released findings from a 2022 annual survey, regarding trust-based occupational defined contribution (DC) schemes. According to the survey, too many DC schemes especially smaller ones, are failing to meet expectations on assessing value. Trustees of DC schemes have a legal duty to produce a value for members (VFM) assessment and include the findings in their annual chair’s statement.
The survey comprised quantitative interviews with individuals (such as trustees, scheme managers or in-house administrators) involved in managing 342 DC schemes of differing sizes, 23 of which were master trusts. The findings showed a lack of awareness from small schemes around new value for members assessments and that smaller schemes are less likely to take action on financial risks, caused by climate change than larger ones.
Nicola Parish, Executive Director of Frontline Regulation at TPR, said:
“Trustees of small schemes should ask whether the best decision they can make for their members is to put them into a better-run, better-value scheme and wind up.
The upcoming joint value for money framework will increase transparency and competition in the market, so now is the appropriate time for trustees to evaluate whether they can compete with the best master trusts in offering value for money.”
On 30 January 2023, TPR launched an open public consultation jointly with the Department of Work and Pension (DWP) and Financial Conduct Authority (FCA) on a holistic framework for the assessment of value for money. The value for money (VFM) framework sets out metrics and standards to assess value for money across DC pension schemes. The framework has been developed to ensure that member outcomes are front and centre when decisions about people's savings are made.
It has been further reported from the survey, that only 24% of DC schemes met TPR’s key governance requirement to assess the extent to which member-borne charges and transaction costs provide good value. As larger schemes were more likely to assess value against costs and charges than smaller ones, only 11% of members were in schemes that failed to meet TPR’s expectations.
Moreover, 208 schemes with under £100 million assets under management (AUM) were quizzed on their awareness of the assessment requirement. 64% reported they were unaware of it. Findings indicated that smaller schemes were more likely to be unaware of the requirements, with 58% small and 70% of micros schemes unaware, compared with 15% of large schemes and 23% of medium schemes. In March, TPR announced it had launched a regulatory initiative to address low compliance levels by smaller schemes with this requirement.
Read the full press release and survey findings, here.
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