Personal Pension  

‘Workplace DC schemes need quality standards’

During a House of Commons session last week Steve Webb MP, minister for pensions, said it was essential that schemes carried out their duties to members.

Mr Webb said: “When people choose to pay into a workplace pension, few will have actively chosen the scheme they join.

“They trust the people managing their pension to be doing everything they can to ensure they receive a decent return when they retire. While we know standards in defined contribution schemes have been improving, we want to make sure all pension providers have key quality standards in place.”

Article continues after advert

Helen Forrest, head of policy and advocacy for the National Association of Pension Funds, said: “DC pensions are the future and if auto-enrolment is to succeed people need to be able to trust that they are of a good standard.

“We remain very worried that ‘pot follows member’ will put savers at risk. We are pleased that the government has recognised those issues and is considering minimum legal standards for DC pensions.”

She said that good governance was critical to drive good outcomes but said there were still “some thorny issues to resolve” before these proposals would work.

Ms Forrest added: “For example it is difficult to place trustee-style fiduciary duties into contract-based schemes without creating conflicts with the existing duties that providers face.”

Adviser view

Minesh Patel, adviser for London-based EA Financial Solutions, said: “Good governance is critical to restore confidence in the pensions system.

“There is also a fundamental communications issue. People need to be educated better. Not everyone understands the difference between DB and DC schemes. Consumers need to be engaged with the process.”

Key Points

The government’s call for evidence is seeking views on:

* How to ensure that people running pensions schemes have the skills and knowledge required to act in members’ interests and to manage conflicts of interest.

* Standards for the design and selection of default options.

* How schemes administer members’ pension pots.