The Pensions Regulator has called on defined contribution (DC) trustees to improve governance after revealing many small schemes are lagging behind.
It published research today showing larger schemes consistently out-perform smaller counterparts on all aspects of governance and administration.
The findings are important as the report looks at whether schemes are meeting the standards set out in the watchdog's new DC code of practice which has been laid in Parliament and will come into place later this month.
Executive director of regulatory policy Andrew Warwick-Thompson (pictured) said in a statement he was concerned trustees are failing to keep pace with new legislative requirements. Also, they are not even meeting basic hygiene factors including keeping member records or complete scheme returns.
While most of the problems lie in smaller schemes, he called for standards to improve across the board.
"Well-run master trusts can offer a number of benefits to members. However, I'm concerned that just half of master trusts are meeting 75% of the relevant standards. That's why we welcome the government's proposal to give TPR new powers to regulate these schemes more effectively."
The regulator wants to prevent members in sub-standard schemes from suffering unsatisfactory outcomes. It is encouraging debate on how best to address this challenge through its 21st century trustee initiative.
If trustees do not improve, Warwick-Thompson warned it "may be the right time to consider alternative solutions".
"We are particularly interested in exploring with our stakeholders the potential benefits to members of encouraging the consolidation of sub-standard schemes of all benefit types and sizes," he added.
The findings are based on a survey conducted by OMB Research between March and April this year with 619 single-employer schemes and 20 relevant multi-employer schemes.
TPR’s main findings:
- Half of master trusts in the survey met at least 75% of the relevant standards, compared to 25% of large, almost a third of medium, and only a minority of small and micro DC schemes. Three quarters of members were in a scheme where at least 75% of the standards were met.
- The boards of master trusts and larger schemes were confident they understood the requirements of the annual chair’s statement. But confidence was much lower in small schemes where 18% were confident, and micro schemes where 33% were confident.
- Awareness of the new DC code increased with scheme size. Almost all master trusts and large DC schemes were aware of the new DC code (100% and 98% respectively), and most reported that they knew a lot/quite a lot about it. In contrast, 54% of micro, 48% of small and 29% of medium DC schemes were unaware of the new code or reported that they knew nothing about it.
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