Watchdog sets out workplace pensions reforms
Small firms due to embark on auto-enrolment need to be aware of recent reforms regarding defined contribution (DC) workplace pensions set out this week by The Office of Fair Trading (OFT) and The Pensions Regulator (TPR).
In its recent market study, the OFT found that some employers were failing to assess value for money when choosing a pension scheme for their staff and that some existing old and high-charging contract and bundled-trust schemes may not be delivering value for money.
In addition, some smaller trust-based schemes are at risk of delivering poor value for pension savers, due to low levels of trustee engagement and capability.
The watchdog has set out steps to tackle these and other problems as follows:
- to address the OFT’s concerns about small trust-based schemes, TPR has agreed to take rapid action to assess which smaller trust based schemes are not delivering value for money. The Department for Work and Pensions (DWP) has agreed to consider whether the TPR needs new enforcement powers to tackle the problem
- to address the OFT’s concerns about old and high charging contract and bundled trust schemes, the Association of British Insurers (ABI) and its members have agreed to an immediate audit of these schemes. The audit will give a full understanding of the charges and any benefits associated with these schemes and ensure savers are getting value for money. This will be overseen by an independent project board
- to strengthen the scrutiny of pension schemes on behalf of employees, the ABI has agreed that its members will establish independent governance committees. Committees should recommend changes to providers and escalate issues to regulators where they see risks of poor outcomes for savers.