The Pensions Regulator (TPR) has once again urged small pension schemes to consolidate to ensure they comply with forthcoming duties related to decumulation.
The Pension Schemes Bill includes measures that will require defined contribution (DC) pension schemes to provide a default option for members to begin taking an income at retirement without making an active decision.
All TPR-approved master trusts offer such options at retirement, according to a new survey from the regulator. However, across the DC market more broadly, 73% of schemes do not offer any default options.
“Schemes that struggle to support savers with their retirement decisions should consider consolidation into schemes that can offer value for money solutions that work for different kinds of savers.”
Nausicaa Delfas, TPR
Almost all “large and medium schemes” (98%), as well as all master trusts, also offer support to members when making active decisions on how to take their pension. However, almost a third (31%) of small schemes – those with between 12 and 99 members – did not provide any support beyond statutory communications. This rose to 40% of micro schemes – those with fewer than 12 members.
TPR chief executive Nausicaa Delfas said that, while the prospect of “guided retirement” was beginning to transform the pensions industry, smaller pension schemes were “not doing enough to prepare for the duty, leaving their members to navigate complex choices alone as they transition into retirement”.
“Schemes that struggle to support savers with their retirement decisions should consider consolidation into schemes that can offer value for money solutions that work for different kinds of savers,” Delfas said.
Just over half (51%) of pension schemes that were aware of guided retirement have started reviewing their decumulation offering, TPR said in a press release. The regulator estimated that approximately 27m people were members of DC schemes that are actively reviewing their decumulation offerings.
TPR has been pushing for “fewer, larger schemes” for many years in an effort to raise governance standards across the sector. The Pension Schemes Bill continues this work with its framework to create “megafunds” of at least £25bn through DC consolidation.
TPR’s survey found that 9% of DC schemes were either already transferring their members to a master trust or were planning to do so.
However, this total was dominated by medium and large DC schemes – those with 100 members or more. Just 4% of micro schemes had considered consolidation or were actively transferring, and more than three quarters had not even considered this in the past three years.
Nausicaa Delfas to speak at Pensions Expert Annual Conference in November
TPR boss Nausicaa Delfas will give a keynote address at Pensions Expert’s Annual Conference at Pennyhill Park in Surrey next month.
As the UK pensions sector faces unprecedented changes and reforms over the next few years, Delfas will outline the regulator’s evolving approach and what it expects from pension schemes and providers.
The conference will begin on 26 November with a live viewing of chancellor Rachel Reeves’ Budget speech from midday. To register to attend or view the latest agenda, visit the dedicated webpage here.
