Mel Charles of the Pensions Regulator estimates that around 200 of the DC pension schemes it oversees are not delivering value for money and should wind up and transfer benefits into larger multi-employer schemes that do.
In a press-release issued yesterday TPR spelt it out.
Pension schemes have been fined a total of more than £30,000 by The Pensions Regulator (TPR) in its mission to ensure savers get value from their pensions.
Last year, TPR launched an initiative to check that savers in defined contribution (DC) schemes are benefitting from rules requiring trustees to assess whether they deliver value through a detailed value for members (dVFM) assessment.
So far, around 17% of DC schemes TPR engaged with as part of its drive on value reported that, having concluded their schemes do not offer good value, have opted to wind up. As dVFM regulations apply to around 1,323 DC schemes, if the results are reflected across the whole DC landscape, more than 200 schemes would be opting to wind up.
Mel Charles, Interim Executive Director of Regulatory Compliance at TPR, said: “These penalties show our determination to ensure DC schemes deliver value for savers.
“Those that can’t meet our expectations should consider whether a transfer to a better-value scheme and winding up is in members’ best interests.
“Trustees can expect to see more penalties issued as we analyse data from scheme returns.”
Published today, TPR’s compliance and enforcement bulletin, shows TPR used its powers 10 times in relation to dVFM assessments between January and June 2024. It issued seven penalties, totalling £19,250, and three improvement notices.
TPR has named schemes fined in relation to dVFM breaches on the penalty notices page of its website. More schemes are expected to be named as further penalties are issued or paid.
Combined with penalties issued between November 2023 and January 2024, when TPR carried out a pilot exercise, total penalties for dVFM breaches have reached £33,750.
Trustees of schemes failing to deliver value must have a plan to improve or transfer members to a better-value scheme.
This is good news for savers and good news for employers stuck with DC schemes that are doing little good for members. Members get to join better run and better invested schemes and employers are released from paying the fees for schemes that are offering little but reputational risk.
The £33,750 in fines issued so far is neither here nor there and this may be a sledge-hammer to crack a nut (in terms of the 17 schemes under the cosh at present). But this news should be a wake up call for all DC schemes that really need to find a way to shape up or shape out.
I support the work of the TPR compliance and enforcement team on this and with regards AE and TCFD compliance. Well done Mel Charles