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OFT’s scrutiny of DC schemes will take a wide ranging approach


The pensions sector is to come under the spotlight following the Office of Fair Trading’s decision to launch a market study into defined contribution workplace pension schemes.

A market study is an increasingly used tool of the OFT which it deploys to scrutinise a market where it has concerns that the market is not working effectively. At the heart of the OFT’s review will be consumer interest and the objectives of the study will therefore be to determine whether the market is working well for consumers, and if not, what measures can be taken to improve the pensions market from the consumer’s perspective. The stated focus of the present study is the value for money and size of pension pots that consumers will have at retirement.

The OFT has broad discretion in selecting sectors in which to undertake a market study. Typically a study will be launched following complaints from businesses, trade associations or consumers, or on the basis of information acquired in the course of its consumers protection and competition enforcement work.

This market study has been triggered by the changes brought in by automatic enrolment. Since many employees are expected to start saving into defined contribution schemes and this sector of the market will grow significantly, the OFT has determined that it should take this action now to minimise any risks to consumers.

A market study is an interactive process with the sector under review. The OFT will gather detailed information about the market. This information may be collected from businesses, consumers and organisations using questionnaires, surveys, focus groups and meetings.

This market study will also involve the OFT working closely with the Department of Work and Pensions, the Pensions Regulator and the FSA as well as the National Association of Pension Funds and the Association of British Insurers.

Once the information has been collected, the OFT’s project team will usually informally discuss its findings and proposed outcomes with stakeholders who will be affected by them. This gives the OFT an opportunity to test its market analysis and the recommendations it is considering. The OFT will then publish its final report.
The OFT has a range of outcomes it can recommend including:

  • Giving a clean bill of health to the market
  • Recommending consumer-focused action
  • Making recommendations to business
  • Making recommendations to Government
  • Taking investigation and enforcement action
  • Making a market investigation reference to the Competition Commission.

There is no set time period in which a market study must be completed although the OFT has stated that its current intention is to publish its findings in August.
Caroline Hobson is a partner in the competition team at law firm CMS Cameron McKenna


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