Failure to find an agreed definition of the 'value for money' concept means trustees and providers are unable to provide schemes in the best interests of all members according to the Pensions Policy Institute (PPI).
In Value for Money in Workplace DC Pensions the PPI says this lack of consensus also means it is hard to compare options within DC workplace pensions, particularly where members and employers also have differing definitions of what constitutes value for money.
However, the study, commissioned by Standard Life, states that the value and security of the pension pot, as well as trust in the scheme, can provide an indication of whether it provides value to members.
PPI senior policy researcher Melissa Echalier said that while investment governance committees (IGCs) can use these as "guiding principles", it will still be difficult to achieve the best outcome for all members.
"Pension schemes need to accept they can't reach the best solutions for everybody," she said. "The report suggests that value for money means something different to different memberships. Some memberships may be more risk averse than others."
Focusing on communication and governance, as opposed to charges, will help IGCs identify the benefits their members want. This can provide better value for money by helping members make more informed decisions when accessing their pensions, the study states.
"One of the concerns is that people are simply accessing their schemes at retirement without thinking about it. If they had kept their pension scheme, it could have lasted 25 years longer," Echalier said. "There are some certain outcomes that we want them to avoid."
The report also claims that IGCs could provide better value for money by offering smarter advice on contribution amounts. It calculates that the average 22-year-old earner could top-up their pension by as much as 44%, if they subscribe to the automatic escalation rate of 12%.
Hymans Robertson partner Rona Train, agreed that IGCs need to communicate with their members to better understand how to provide value for money.
"Post 'freedom and choice', members are faced with more complex decisions at retirement than ever before," she said. "There is clear value for individuals if their schemes can support them with their needs and decisions here."
The PPI also raised concerns that IGCs are not focusing enough on providing value for money during retirement. It argues that members are not being equipped to make active decisions about accessing their pension pots. This is due to providers not assessing how members are likely to want to use their savings.
The report will provide ideas for IGCs who recently announced plans to try and improve the value for money of their schemes. Last month, Royal London's and Aegon's IGCs removed some fees and exit charges in a bid to improve the cost-effectiveness of their schemes.
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