Editorial: When it comes to ensuring value for defined contribution members, bigger may often be better.
The Pensions Regulator’s new review into whether trustees are carrying out adequate assessments of value for members has been prompted by concerns that small schemes are not doing it properly.
‘Economies of scale’ is a phrase increasingly bandied about in the industry, not only as part of discussions on pooling defined benefit schemes, but also in relation to DC consolidation. The latter may well be the only answer for some small DC schemes struggling to adequately assess value for members, let alone provide it.
Generally, the smaller the scheme, the smaller the budget. With limited time and resources, trustees find it difficult to provide the same level of value offered by larger plans and mastertrusts.
Currently there are obstacles standing in the way of DC consolidation, such as the need to obtain an actuarial certificate before completing a ‘pure’ DC-DC transfer – something that can be both expensive and time-consuming.
Removing barriers to allow scale to develop in DC is being explored by the government. In its consultation, which closes on November 30, the Department for Work and Pensions is seeking views on draft regulations intended to simplify the bulk transfer of DC pensions without member consent.
In the meantime, as the regulator continues to step up its oversight of how schemes are run, a new survey has revealed that seven in 10 professional trustees are calling for a standards body to monitor professional trustee performance.
It found that almost 90 per cent of respondents agreed with the watchdog that higher standards of duty and care should be expected of professionals than lay trustees.
From regulatory scrutiny to increasing concerns about DB covenant risk the burden on trustees is rising.
There are various ways trustee boards can drive up competence and ensure integrity, but having a proficient chair with excellent management skills (page 12) is a very good place to start.
Sophia Imeson is associate editor at Pensions Expert. You can follow her on Twitter @SophiaImeson and the team @pensions_expert.
