An overwhelming majority of smaller schemes are failing to meet all standards of governance and trusteeship, The Pensions Regulator's (TPR) annual defined contribution survey shows.
Published today (1 August), the findings showed that just 4% of micro schemes, those with between two and 11 members, and 1% of small schemes, those with between 12 and 99 members, were meeting all of the governance standards set out by the watchdog.
A total of 447 interviews were completed for the survey, made up of 430 single-employer schemes and 17 master trusts. The sample also included medium schemes with 100 to 999 members, and large schemes with over 1000 members.
The survey also found that 43% of trustees of small schemes had considered winding up, but those schemes were more likely to meet the required standards than schemes of the same size that had not considered winding up.
Furthermore, it found that two-thirds of trustees directly contacted by TPR went on to spend more time on their scheme's governance and administration, and three-quarters of schemes reported they had more than half of the cyber security controls expected by the regulator in place.
TPR executive director of regulatory policy, analysis and advice David Fairs said the figures "clearly show" that people saving for retirement are generally "far better served" by bigger schemes.
He warned: "This long tail of smaller schemes which do not meet the standards we expect is simply unacceptable."
He added that the number of poorly run schemes need to be reduced so that no saver's retirement is put at risk by bad governance.
Fairs added: "All trustees - of pension schemes big and small - should be taking their role tremendously seriously and ensuring that they are running their scheme properly so savers get a good retirement."
The survey comes as the watchdog launched a consultation on scheme governance and trusteeship last month, in which it urged "badly-run schemes" to improve or consolidate.
This could be to larger schemes such as master trusts, which are undergoing an extensive authorisation regime which kicked off last October. So far 11 of 38 master trusts which applied to the regulator have been authorised, with Mercer being the latest to be given the stamp of approval last month.
Barnett Waddingham partner Paul Leandro said the survey results support the rhetoric that "big is better".
He added: "As the master trust authorisation process nears its conclusion, we expect to see an increasing amount of DC assets flow to the market.
"However, trustees should take the selection of the receiving master trust seriously and should take time to consider the impact on members and ensure any pension scheme change improves the potential outcome for members."
The findings echo proposals from the Department for Work and Pensions which closed a consultation setting out the proposal to ‘nudge' the consolidation of smaller DC schemes in April.
• KGR 1: Trustee boards must possess or have access to the knowledge and competencies necessary to properly run the scheme
• KGR 2: Trustee boards must assess the extent to which charges/transaction costs provide good value for members
•KGR 3: Core scheme financial transactions must be processed promptly and accurately
• KGR 4: Trustees of master trusts must meet independence requirements (applicable only to master trusts)
• KGR 5: Trustee boards must ensure the default investment strategy is suitably designed for their members.
More than half of BlackRock’s flagship UK defined contribution (DC) default fund’s assets will be invested in ESG strategies by June 2021.
Graeme Bold says the right communications can improve both the level of savings and the outcomes for savers.
More than half of UK savers agree they are unable to save sufficiently to achieve the retirement they want, according to research by BlackRock.
Pension savers have held off from making changes to their pensions despite nearly half having been impacted by the pandemic, research finds.