The Independent Governance Committee of pension provider Prudential has closed 40 funds in one year after it deemed the range of investment choice was "too wide" for its members.
The latest governance report from Prudential's Independent Governance committee showed concerns around the number of funds available for workplace pensions and the value for money offered by some.
As a result the provider closed 40 funds in 2018 and simplified options, while those failing the IGC’s value for money tests were eliminated.
Prudential had 127 funds on offer and this has now been cut down to 87.
The committee found that although employers had previously said that they liked having a range of funds on offer, in practice only a minority of employers explored this.
Due to some funds taking too long to close, Prudential paid compensation claims to 3,700 members who lost investment performance during the closure period in 2018.
The ICG’s report also showed that it has taken Prudential almost three years to make all default strategies compatible with pension freedoms, which were introduced in 2015, with the company completing pension freedom work in September 2018.
In April 2015 tax rules were changed to allow individuals in defined contribution pensions to choose whether they use their pension to provide a lump sum, a guaranteed income for life, or to place their money in a drawdown plan.
Following the introduction of the new rules, the Financial Conduct Authority required firms that operate workplace personal pension schemes to set up and maintain IGCs.
ICGs' duties include scrutinising the value for money of the provider’s workplace pension and making recommendations to the provider’s board.
An IGC must have at least five members, the majority of which must be independent, including an independent chair.
Meanwhile last year Prudential redesigned its communications, including annual benefit statements, and processes to help members better understand the investment options available and how these might suit their own retirement needs.
The IGC report itself includes case studies, so that members can see the potential growth values and costs associated with different levels of pension investment.
Lawrence Churchill, chairman of Prudential’s IGC, said: "There are some signs that members are taking more notice of their pension savings but there is much more to do here.
"Pension scheme communication and engagement remain the most difficult areas to get traction across the industry.
"The recent FCA review cited that only 52 per cent of consumers read their annual pension statement. It also highlighted that the prospect of individuals not having adequate income in retirement is a central challenge for the whole industry."
He added: "Our key focus in 2018 has been on the most popular investment choices of the members and the costs associated with investing in them.
"We have demonstrated that transaction costs had a negligible effect on net investment returns – an important finding given the level of concern across the industry."
As of June 2018, Prudential looks after £664bn of assets for over 26m customers worldwide.