Pensions  

Pensions Regulator sets standards for DC pensions

Last week, The Pensions Regulator issued a 20-page consultation, Regulating Work-Based Defined Contribution Pension Schemes, in which it laid out a series of standards detailing what DC schemes should deliver for members, and how.

In the document, TPR praised the way that FSA-supervised group personal pension schemes have been run, following six core principles to ensure better transparency and oversight.

TPR said its latest consultation aimed to build on the positive momentum created by such measures as GPP provision and auto-enrolment, to ensure that DC schemes meet better minimum standards as well as to give reassurance to employers and employees.

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The report stated: “We expect all DC schemes to demonstrate how they will comply with our principles for good DC schemes and this will give employers reassurance about their choice of scheme.

“Where we find schemes falling short of the standards we have set, we will expect them to improve and we can take action to put things right where necessary. This includes issuing notices directing compliance with the law, fines and removing trustees and replacing them with new ones.”

Key proposals:

A set of 31 quality features covering the key areas in a DC scheme

A ‘comply or explain’ regime meaning schemes will be expected to demonstrate how they comply with these quality features, or to be able to explain any inconsistencies

A code of practice for workplace DC trust-based schemes that provides practical guidance on the requirements of pensions law and sets out standards of conduct.

Regulatory guidance setting out good practice standards.

Responses:

Industry:

Darren Philp, NAPF policy director: “We are disappointed that the proposed code only applies to trust-based pensions and not contract-based schemes. This means 3m people are saving into a type of pension overlooked by this effort.”

Provider:

Graham Vidler, acting managing director, customer and proposition for the National Employment Savings Trust, said: “It is vital that DC schemes deliver the best possible outcomes, both for the millions of people already saving in them and the millions of people who will start saving for the first time under the new employer duties.”

Kate Smith, regulatory strategy manager for Aegon: “FSA regulation sets minimum standards, but to remain competitive, GPP providers must innovate and go beyond these minima. All this helps improve member outcomes – TPR’s objective.”

Adviser: Simon Kew, senior adviser at London-based Jackal Advisory, worked for the Pensions Regulator from 2007-2010. He said: “I appreciate the effort. It is all sensible, which is what is to be expected of a regulator. It is no surprise that it is aligned to the FSA’s approach and I think the DC focus is well overdue.”