Pensions - Articles - More can be done to help small schemes


Paul Cuff, Co-Chief Executive Officer, Xafinity said: “More should be done to help small schemes, many appear to be over charged and under serviced. Consolidation can be a solution, schemes could get better quality advice, be better governed and have access to a more effective and appropriate range of assets while reducing costs. The biggest barriers to consolidation are the lack of transparency in charging structures and inertia. Too many schemes continue with the status quo because it’s all they know but that is no longer good enough.

 ”Master trusts have a significant role to play in DC pension provision, but not in the DB environment. Moving to a DB master trust requires a fundamental change to legal structures, making it an irreversible decision. Xafinity has recommended the Regulator look at other options that could achieve better consolidation results for small schemes.”
  
 Paul added: “Although the current regulatory framework around member protection is sufficiently robust, clear and flexible, the Regulator needs to use its powers more frequently and more effectively in the right circumstances. We would also like to see the compulsory introduction of professional trustees.
  
 “The current 15 month timeline for completing a valuation is far too long for trustees. A shorter timeframe would free up time for more proactive management of the scheme. Real time monitoring of funding positions and consideration of longer term objectives would mean valuations are no longer viewed as one-off events.
  
 “The Government need to focus on the investment choices for pension schemes; the demand for gilts because of the herding culture of pension schemes is distorting the market. With yields at historic lows it is unlikely that this market will change soon, unless the Government intervenes.
  
 “We encourage our clients to think differently, to challenge the norm, and to really understand why they take the decisions they do.
  
 Any move towards a different approach will require trustees, sponsors and advisers to think differently. This will be achieved much more efficiently with regulatory intervention on an industry wide scale.”
  
 Paul concluded: “The Green Paper is just the start of what is to come for DB pension schemes, they have received a lot of detrimental media coverage and it is definitely time for the industry to be reviewed and for better member outcomes to be achieved.”
  

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