Providers and advisers have warned The Pensions Regulator to avoid being overly prescriptive in its treatment of small defined-contribution schemes ahead of automatic enrolment.
In an interview with Money Marketing last week, TPR chief executive Bill Galvin (pictured) suggested that “sub-scale” DC schemes with fewer than 1,000 members may not be considered suitable for auto-enrolment.
He said: “Our view is that it is difficult to be a significant player in the pension market if you have fewer than 1,000 members.
“We would expect trustees of very small DC schemes to ask themselves very serious questions about whether it is possible to meet our six principles for good provision if they have fewer than 1,000 members. If it is not, it may be that they are not the right vehicle for an employer to use for auto-enrolment.”
Helm Godfrey head of projects Steve Wood says: “The Pensions Regulator should not pre-judge the viability of smaller DC schemes. It is up to trustees and their advisers to decide whether they feel they can meet the six principles.
“Small schemes can be run competitively so members do not suffer disproportionately high charges. For instance, many smaller schemes invest in pooled funds with low annual management charges.”
Scottish Widows head of pensions market development Ian Naismith says: “The 1,000-employee benchmark The Pensions Regulator refers to is a good prompt for all schemes below this size to challenge themselves as to whether they can uphold the six principles.
“Although we expect many smaller schemes will struggle to achieve this due to lack of scale, the 1,000 benchmark should not be applied too rigidly as some small schemes are governed extremely well.
“We also need to be extremely careful not to cause unnecessary concern among employers by suggesting requirements for qualifying schemes that go beyond those in the legislation for automatic enrolment.”
Radcliffe & Newlands chartered financial planner Mel Kenny says: “I do not think the regulator should be too prescriptive here. The concerns are understandable for some of the older and more traditional schemes but these issues can be overcome through the use of pooled funds.”