Higher standards for defined contribution (DC) pensions

Informed member choices at retirement and greater employer engagement are the focus of a new Pensions Regulator statement issued today about higher standards for defined contribution (DC) pension schemes.

Key points in the statement include:

• We want trustees to do their best to help members who are retiring make the right choices about their savings and we have a particular focus on improving the standards of pre-retirement processes and member communications;
• We encourage employers to engage responsibly with employees about pension arrangements;
• Our aim is to ensure higher standards for DC pensions along with a minimal additional regulatory burden.

To help trustees ensure high standards in pre-retirement literature, we have updated our member leaflet on retirement choices. The leaflet describes the range of options available to a member approaching retirement, including annuity types and other alternatives. We are also reviewing standards of pre-retirement literature and processes in a sample of schemes.

Today we have published our first analysis of the DC trust-based landscape, 'DC Trust: A presentation of scheme return data' giving a snapshot of the current shape of DC trust-based provision. This builds on work carried out over the past three years to analyse the shape of the trust-based DC landscape and the risks facing DC schemes. This complements the Purple book to give the most comprehensive view of the trust-based pensions landscape to-date.

The Pensions Regulator, chief executive Tony Hobman says: “It is more important than ever in these challenging economic times for members to make the right decisions to maximise value for money at retirement.

“We know that our work on DC will enable trustees, employers, advisers and providers to improve the outcomes for DC scheme members. In the run-up to 2012 we are focusing on providing more education to assist employers with their pension provision and are looking at the standards in key processes for DC pensions. We are willing to enforce better practice, if we need to.”

1. The Pensions Regulator is the regulator of work-based pension schemes in the UK, with objectives to protect members' benefits, promote good administration and reduce the risk of calls on the Pension Protection Fund. Our approach is risk-based focusing on education and enablement, with enforcement where appropriate. We have the ability to:
2. • collect information about pension schemes; through scheme returns, under the scheme funding regime and as well as statutory (including whistleblowing) reports;
   • issue notices requiring actions to tackle non-compliance, prohibit trustees who are judged not fit and proper to carry out their duties or appoint independent trustees;
   • direct pension schemes as to how to calculate their liabilities and the contributions required;
   • issue a contribution notice where there is an attempt to avoid liabilities, or a financial support direction where the employer is a service company or insufficiently resourced.

• Clive Power 01273 648487
• Katherine Long 01273 811859
• Ruth Hallam 01273 627752
• Veena Mapara 01273 627611
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• http://www.thepensionsregulator.gov.uk/

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