Commenting on the joint discussion paper by The Pensions Regulator (TPR) and the Financial Conduct Authority (FCA) ‘Driving Value for Money in DC Pensions’, Laura Andrikopoulos, Head of DC Governance, Partner says: “We welcome the joint TPR/FCA discussion paper on assessing value for money in DC schemes. A common framework is essential to support members’ in understanding to what extent their current arrangement provides value regardless of its overarching trust or contract based structure. Currently there are a number of definitions of ‘value for members’ and ‘value for money’ in play which hinders proper comparison and transparency. We look forward to seeing a joined-up approach to value assessment in DC pensions that puts member outcomes at the heart of its considerations of what really constitutes good value, as opposed to a narrower focus on charges that fails to capture the complete picture.”
Kate Smith, Head of Pensions at Aegon comments on the FCA / TPR’s framework for value for money in defined contribution pension schemes: “Trustees and IGCs already annually publish whether their scheme provides value for money, but each one does this in a slightly different way with no consistent approach. A value for money framework, with published metrics and benchmarks, should enable trustees and IGCs to better compare their scheme with other providers and pension schemes. But the devil will be in the detail as creating benchmarks is likely to be challenging.
“The defined contribution market is incredibly competitive from a costs and charges perspective. But being cheap doesn’t necessarily mean value for money. We therefore welcome that the regulators are looking beyond purely costs and charges to other equally important aspects of value for money, such as investment performance and scheme oversight including data quality and communications. Support for members and employers is increasingly becoming an important scheme feature which helps improve member outcomes.
“Value for money is clearly at the top of the regulator’s agenda, with the new value for money assessment about to become effective for occupational pensions schemes with assets of less than £100,000 as part of the DWP’s consolidation agenda. Having a value for money framework will enable trustees and IGCs to clearly see whether their scheme provides value for money in the accumulation stage, and if not, nudge them to making improvements or consolidate into a scheme which does provide value for money for members.”
Driving Value for Money in Defined Contribution schemes
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