The Pensions Regulator (TPR) has launched a review into whether trustees are carrying out adequate assessments of the costs and charges paid by members.
TPR believes many trustees of small and micro schemes may not be properly assessing value for members.
The thematic review will consider the explanation of the value for member assessments made by 100 small and micro schemes in their chair statements. A report on the findings is expected to be published by summer 2018.
It is essential that members get the benefits they deserve from their pension. Trustees are required to carry out an annual value for member assessment, which can help trustees to identify and address poor performing areas, in turn making a scheme more likely to provide good outcomes for members.
The findings of TPR’s review will enable the regulator to understand the challenges trustees face when conducting the assessment. Any examples of good practice highlighted by the review may be used to help develop targeted guidance for this sector, supporting trustees of small and micro schemes to achieve value for members.
Anthony Raymond, Acting Executive Director of Regulatory Policy at TPR, said: “Poor value for members is one of the key risks that trustee boards need to manage.
“From our research and experience we believe that many small and micro schemes are failing to meet our expectations by providing a quality assessment of how their charges represent value for members. We are conducting this thematic review to better understand this position.
“We are concerned about a tail of sub-scale pension schemes and strongly believe that it is unacceptable to have two classes of DC pension saver – those that benefit from the premium of scale and good governance and administration, and those that do not.”
- Regulation 23 of the Occupational Pension Schemes (Schemes Administration) Regulations 1996 requires trustees to produce an annual governance statement signed by the chair of the trustee within seven months of the end of each scheme year. The requirement was introduced into the Administration Regulations by regulation 17 of the Occupational Pension Schemes (Charges and Governance) Regulations 2015.
- Within this statement they are required to confirm that they have carried out the annual assessment of the extent to which the services paid for by members provide good value. Trustees should act as demanding consumers on behalf of their members and exercise their judgment on the basis of evidence. Assessing and securing value for members is a key trustee responsibility.
- As part of the thematic review, TPR will request and review the chair statements from a cross section of 100 small and micro defined contribution (DC) schemes, including some run solely by lay trustees and some with a professional trustee. Meetings will then be arranged with 20 schemes to further analyse the provided information and collect qualitative information about value for member assessments.
- TPR’s campaign 21st Century Trusteeship – Raising the Standards of Governance focuses on key areas where those running pension schemes can improve standards. One of the themes of the campaign is value for members.
- TPR is the regulator of work-based pension schemes in the UK. Our statutory objectives are: to protect members’ benefits; to reduce the risk of calls on the Pension Protection Fund (PPF); to promote, and to improve understanding of, the good administration of work-based pension schemes; to maximise employer compliance with automatic enrolment duties; and to minimise any adverse impact on the sustainable growth of an employer (in relation to the exercise of TPR’s functions under Part 3 of the Pensions Act 2004 only).