The Office for Fair Trading (OFT) has vowed to target small trust-based schemes, governance issues and legacy charges in defined contribution (DC) to help employers make an informed decision about their scheme for auto-enrolment.
In its final report on the DC pensions landscape, the OFT said The Pensions Regulator will take “rapid action” to assess whether smaller trust-based schemes were delivering value for members – and the Department for Work and Pensions (DWP) has agreed to look into whether TPR should be given new powers to enforce this.
It also recommended the government look at improving the quality of information available on costs and charges for pension savers and expressed concern about the lack of independent scrutiny of contract-based schemes.
The OFT said the DWP should consult on improving the transparency and comparability of information about charges and whether providers could disclose a single annual management charge and investment transaction costs.
Meanwhile, the Association of British Insurers (ABI) has agreed to conduct an audit of old or high-charging schemes and has said it will seek to establish independent governance committees to address concern around the lack of governance in contract-based schemes.
Sackers partner Zoe Lynch said: “We understand that the DWP had been waiting for the OFT’s recommendation before taking action on charges so I imagine we can now expect a consultation on charges in schemes being used for automatic enrolment imminently.”
Standard Life UK and Europe chief executive Paul Matthews said: “We must remember that charges are only one element of workplace pensions. Investment fund selection, fund performance and the level of employee and employer contributions can have the biggest impact on members’ final outcomes at retirement.
“The introduction of independent governance committees is a positive step forward and will help to instil greater confidence for savers, and we have already commenced our search for the independent members of our committee.”
While the National Association Pension Funds welcomed the report, chief executive Joanne Segars said she wished the OFT had “gone further” and recommended consolidation and the creation of super trusts.
She said: “We are particularly concerned that the report risks letting down pension savers who need someone solely on their side, with the independence and power to act in their interests, to make sure they get the best outcomes for their retirement savings.
“We would have preferred a clear direction that employers have a choice – they should either be prepared to provide governance themselves or use a master trust arrangement. The proposal to have governance as part of the provider risks fudging the issue and leading to potential conflicts of interest.”
“The introduction of independent governance committees is a positive step forward and will help to instil greater confidence for savers, and we have already commenced our search for the independent members of our committee.”
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