Independent research body the Pensions Policy Institute has backed the idea that value for money is about more than cost when it comes to retirement savings, in a new report on the good governance of pension schemes.
Commissioned by Standard Life, the document acknowledged costs and transparency are important for scheme members, but this should include value for money on services like administration, communication and governance.
It also suggested prioritising consistent returns or an investment strategy in line with the level of risk members are willing to take.
Three outcomes are likely to be seen as positive indicators of value for money by pension savers, according to the report - pension pot value, the security of the pot, and the level of trust in the scheme.
Therefore the industry should focus on these three areas, it stated.
Charge levels and structures, investment returns, and contribution rates must also be included in the industry debate, it added, as these have a direct impact on the value of the pension pot.
Good governance benefits pension savers in six key ways:
|Communicate the importance of contribution rates|
|Ensure that there is transparency around areas such as charges|
|Set the right default investment strategy for the membership, monitor it, then take timely and appropriate action to change it if necessary|
|Ensure effective administration|
|Ensure member communications are in the right form set at the right level of understanding and frequency|
|Challenge, negotiate and possibly lower charges|
The report also stated that in future, independent governance committees may want to consider value for money in decumulation.
Melissa Echalier, Pensions Policy Institute senior policy researcher, said those responsible for pension schemes need to consider how contribution levels, governance and charges interact in terms of identifying value for money for their members.
“It may not be possible for independent governance committees and trustees to ensure the best member outcomes for all members; these bodies may simply need to make decisions that are broadly in members’ best interests.”