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Poor-value schemes are wound up as TPR takes tough action

Ref: PN24-11

Issued: Thursday 14 March 2024

Action by The Pensions Regulator (TPR) to ensure savers receive value from their pension schemes is helping drive market consolidation and resulted in a fine against a corporate trustee.

Regulations, which came into force in October 2021, require trustees of schemes with less than £100 million in assets to undertake a more detailed assessment of value for members than larger schemes.

Those failing to deliver value must set out a plan to improve or transfer members to a better-value scheme.

TPR launched an exercise to ensure compliance with rules over value for member assessments.

The initiative is already helping to drive consolidation, with 16% of schemes from the pilot reporting that, having concluded their schemes do not offer good value, they have opted to wind them up.

Following the initial pilot, TPR will be scrutinising information from defined contribution scheme returns with the potential for fines to be issued for non-compliance.

TPR has already issued a fine of £12,500 against a corporate trustee. This penalty will be included in TPR’s next compliance and enforcement bulletin, covering July to December 2023, which will be published later this spring. Further fines will be issued shortly.

Mel Charles, TPR’s Interim Director for Frontline Regulation, said: “Where trustees are found to be in breach of their duties on value, we’ll want to understand how they’ll improve. But, if they can’t or won’t, we expect them to transfer members to a better-value scheme and consider winding up their scheme.

“It is encouraging that our initiative has shown schemes are now actively choosing to wind up in the face of the new regulations.” 

Notes for editors

  • On 6 March, the Chancellor of the Exchequer, Jeremy Hunt, as part of the spring Budget, announced new powers will be given to TPR and the Financial Conduct Authority to ensure better value from defined contribution schemes by judging performance on overall returns, rather than cost alone, as part of a value for money (VFM) framework. Government confirmed it will legislate at the earliest opportunity to apply the VFM framework across the market and provide TPR with new powers to ensure key disclosures are in place by 2027.
  • TPR’s value for members regulatory initiative started with an initial pilot sample of hybrid schemes. The next phase of the initiative will involve analysing data from DC scheme returns.
  • TPR is the regulator of workplace trust-based pension schemes in the UK. Our statutory objectives are to:
    • protect members’ benefits 
    • reduce the risk of calls on the Pension Protection Fund
    • promote, and to improve understanding of, the good administration of work-based pension schemes
    • maximise employer compliance with automatic enrolment duties
    • minimise any adverse impact on the sustainable growth of an employer (in relation to the exercise of the regulator’s functions under Part 3 of the Pensions Act 2004 only)

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