The Pensions Policy Institute (PPI) is today publishing "Value for money in DC workplace pensions", a report commissioned by Standard Life.
The report highlights that, while there is no single definition of value for money in pensions, there is consensus that value for money is about more than simply cost. Although costs and transparency of costs are important, consideration of value for money should also include elements such as administration, communication with members, and governance. Schemes may also look for consistent returns or an investment strategy in line with the level of risk that members are willing to take.
Three outcomes are likely to be seen as positive indicators of value for money by members. They are pension pot value, the security of the pot, and the level of trust in the scheme.
In practice, good governance can be the lynchpin for driving better value for money, as it can communicate the importance of contribution rates and set the right investment strategy for the membership. It can also ensure effective administration and appropriate member communications, as well as challenging and negotiating charge levels.
Much debate has so far focused on value for money during accumulation. However, it is important that members get the best value for money in retirement as well.
Melissa Echalier, PPI Senior Policy Researcher said: “Those responsible for pension schemes need to consider how contribution levels, governance and charges interact in terms of identifying value for money for their members.
It may not be possible for Independent Governance Committees and trustees to ensure the best member outcomes for all members; these bodies may simply need to make decisions that are broadly in members’ best interests.”
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