The Pensions Regulator is proposing to reduce the number of poorly-governed pension schemes by promoting consolidation.
The watchdog launched a consultation today (July 2), The Future of Trusteeship and Governance, which outlines the problem and considers how the trustee model can be made more effective.
In the document, TPR said trustees of underperforming schemes will need to consider whether they are able to offer value for members, or whether savers are better served in larger schemes, which typically benefit from economies of scale.
Authorised master trusts offer a route for consolidating defined contribution schemes, with group personal pensions providing an alternative route for securing savers’ benefits in this sector, TPR noted.
The regulator is also working with the Department for Work and Pensions to find a solution to support defined benefit consolidation, with discussions currently considering the shape of an authorisation and supervision regime for DB superfunds.
David Fairs, executive director of regulatory policy, analysis and advice at TPR, said trustees were either "asleep at the wheel or not taking their responsibilities seriously", meaning the governance of some schemes was "frankly, breaching the law".
Mr Fairs stressed that bad governance meant savers would have less money in their pots for retirement.
He said: "The majority of trustees do a good job, but the system isn’t working for everyone and we can’t sit back and let trustees who fail in their duties carry on this way.
"Savers rely on pensions in their retirement and being in a poorly run scheme will impact on the standard of living they expect."
In its 30-page consultation, TPR welcomed views on topic such whether the law should change so trustees would have to show how they acquire training or qualifications, or if there should be requirements for ongoing training, such as CPD.
According to Vassos Vassou, professional trustee at Dalriada Trustees, raising scheme standards and governance for all pension schemes was a never-ending challenge.
He said: "The regulator’s consultation focuses on important areas such as trustee knowledge and understanding, diversity, sole trusteeship and consolidation of DC schemes.
"The consultation also raises the possibility of having a professional trustee on every board. This in particular would be something of a game changer for the industry improving governance standards and driving more robust discussions between boards, sponsors and the regulator."
The consultation will be open for 12 weeks, closing on September 24. Responses can be submitted through the TPR website.