Work on a new initiative has begun to check that savers are receiving value from their pensions.
The Pensions Regulator (TPR) is launching its new regulatory initiative to check savers in defined contribution (DC) schemes are benefitting from new rules that require trustees to assess whether they are delivering value for their members.
The move by TPR comes as part of its work to put savers at the heart of everything it does, at a time when savers are bearing more risk and responsibility for their retirement choices. Driving up value will be crucial for the many millions of people now saving into a DC scheme.
Under the regulatory initiative, TPR will be checking that trustees of DC schemes with assets under management of less than £100m are complying with new value for members (VFM) regulations that came into force in October 2021.
The move follows a survey of DC schemes carried out by TPR last year that found just 17% of schemes required to complete the new value for members assessment had done so, and that 64% were unaware of this statutory obligation.
TPR will take a data-led approach in order to contact selected schemes about their value for members assessment, including those that have indicated they have failed the assessment. The initiative will then check that trustees have plans in place to improve their assessments.
Where improvements in compliance cannot be evidenced, TPR will ultimately expect trustees to wind up and consolidate into a better run scheme.
Nicola Parish, Executive Director of Frontline Regulation at TPR, said:
“All savers deserve to be in schemes that provide value for money. Our regulatory initiative aims to ensure trustees in smaller DC schemes are properly assessing the value their members are getting.
“We will be reaching out to trustees we find in breach of their duties to understand how they will put things right, and if they can’t or won’t, we’ll expect them to wind up and put their members into a better run scheme. If necessary, we will consider using our powers to ensure savers are in schemes that are being run in their best interests.”
Note: the timing of the new value for members assessment is linked to the scheme’s first scheme year end date after 31 December 2021. At the time of completing the DC Survey some schemes may not yet have been legally required to complete the assessment.
Notes to editors
- Final planning for the VFM regulatory initiative is ongoing and communication to trustees will begin later this year.
- The regulatory initiative is separate to the joint proposal from Department for Work and Pensions, TPR and Financial Conduct Authority for a value for money framework.
- TPR’s DC Survey for 2022 (conducted 25 October to 21 December 2022) will be published later in the year.
- VFM assessment forms an integral part of a trustee’s duties and the results of the assessment can have significant impact on members’ savings and help to safeguard positive member outcomes.
- New requirements for schemes with less than £100m in assets came into force in 2021 — Completing the annual Value for Members assessment and Reporting of Net Investment Returns.
- The Pensions Regulator 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 the regulator’s functions under Part 3 of the Pensions Act 2004 only).
