Jessica O'ConnorSmall defined contribution (DC) schemes failing to compete with better governed larger ones are being urged to consider winding up by The Pensions Regulator (TPR).
After issuing almost £100,000 in penalties to small DC schemes for governance failures related to the more detailed value for members (dVFM) assessment, TPR said it wanted trustees that cannot compete with the industry’s best to think about whether their savers would be better off in a larger scheme.
In 2021, new rules came into force requiring certain schemes to complete the dVFM assessment to enhance transparency, improve governance and reduce the risk of savers receiving poor value.
However, TPR research in 2021 showed just 17% of schemes required to complete assessment had done so, and 64% were unaware of this statutory obligation.
In response, TPR launched a large-scale regulatory exercise, running throughout 2023 and 2024, which included probing DC scheme returns to ensure compliance with this clear governance requirement.
TPR’s compliance and enforcement bulletin, showed that TPR had increased its use of powers in relation to dVFM assessments between July and December 2024 compared with the first half of that year.
Since it launched its initiative, TPR said it had issued penalties to 19 schemes making the overall total in fines £97,750.
Gaucho Rasmussen, TPR’s executive director of regulatory compliance, said: “All savers deserve to be in schemes with good governance.
“Where trustees cannot compete with the best in the market, either in terms of value or governance, they should consider whether a transfer to a better-value scheme and winding up is what is best for their savers.”
As well as ensuring compliance with dVFM regulations, TPR, along with the Financial Conduct Authority (FCA) and the Department for Work and Pensions (DWP), is working in partnership to develop a value for money framework.
This aims to improve the value schemes deliver for savers by standardising the assessment process, enabling comparisons to be made across the DC landscape including contract and trust-based schemes.
TPR is also set to introduce a more proactive supervisory approach to improve the quality of trusteeship, with a greater emphasis on providing value.
Rasmussen added: “Our use of automatic enrolment powers has remained consistent, with compliance continuing to remain high.
“Through the compliance and enforcement demonstrated in this bulletin, this period saw 97% of employers pay their workers’ contributions in on time.”
