The Government is considering introducing “quality thresholds” for defined contribution pensions as part of efforts to ensure people are not automatically enrolled into poor value schemes.
The Department for Work and Pensions is currently looking at ways to ensure people receive good value for money from their auto-enrolment pension scheme.
In November, the DWP published a wide-ranging policy document, titled Reinvigorating Workplace Pensions, outlining how it thinks saving could be made more attractive.
The paper explores a number of policy options, including forcing any scheme which does not meet certain efficiency standards to merge with another scheme and encouraging the development of scale in occupational pensions provision.
Addressing the Department for Work and Pensions select committee earlier today, pensions minister Steve Webb (pictured) said: “Quality is the key. We have to make sure people are enrolled into schemes of good enough quality.
“If small schemes cannot meet whatever quality definition or thresholds we have, they won’t be able to continue.
“So you shouldn’t be able to be auto-enrolled into a scheme that is not [good quality] or auto-transferred into a scheme that is not [good quality].
“Once we have defined what that means it may well be that small schemes cannot meet those standards, and they would combine with other schemes or the scheme members get moved into other schemes.
“My sense is the market will get us some of the way there in terms of consolidation but not all of the way, so we probably will be setting standards that will lead to further consolidation.”