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Pensions Regulator shines spotlight on DC schemes

The Pensions Regulator says it will be focusing on promoting higher standards for defined contribution pension schemes in the run up to 2012 and the introduction of personal accounts.

This marks a switch in focus from defined benefit schemes to DC schemes which TPR says it is taking in light of the impact of the economic downturn on members approaching retirement and the imminence of the 2012 reforms.

TPR says it aims to improve the standards of pre-retirement processes and member contributions for those in DC schemes.
It wants employers to engage responsibly with employees about pension arrangements and wants to ensure higher standards but with a minimal additional regulatory burden.

It also says it will enforce better practice if necessary.
To encourage higher standards in pre-retirement literature, TPR has updated its member leaflet on retirement choices which describes the range of options available to a member approaching retirement, including annuities and other alternatives.

TPR says it will be reviewing the standards of pre-retirement literature and processes in a sample of schemes.

TPR chief executive Tony Hobman says: “It is more important than ever in these challenging economic times for members to make the right decisions to maximise value for money at retirement.

“We know that our work on DC will enable trustees, employers, advisers and providers to improve the outcomes for DC scheme members.

“In the run-up to 2012 we are focusing on providing more education to assist employers with their pension provision and are looking at the standards in key processes for DC pensions. We are willing to enforce better practice, if we need to.”

The Society of Pension Consultants president Duncan Howorth says that policymakers have tended to focus on “palliative treatments” for DB schemes in the past rather than forward planning for DC schemes.

He says: “It is right that the Regulator should move to focus on DC provision, its governance and effectiveness and, indeed, SPC’s own activities are increasingly focused on DC best practice.

“There are significant challenges for the numerous smaller group personal pensions where adviser and provider activity is limited, and we view this as an important area of focus for the Regulator. Advisers have a key role to play in ensuring employers build governance and confidence in their schemes.”

Standard Life head of pensions policy John Lawson says improving member engagement is key to making DC work.
He says: “Reviewing the quality of administration, investment returns and charges on a regular basis can help members maximise their retirement funds.

“Our research shows a well targeted and executed communications programme can help improve member engagement and knowledge, ensuring the workforce is best placed to make informed decisions.”

Scottish Life head of pensions strategy Steve Bee says: “I’ve said many times that if people saving in pension schemes get advice on their options at only one point in their lives it should be at the point of retirement.

“That is the point where so many of us make the choices that will affect our income for the rest of our time on the planet. The choices made at that point in life are irrevocable; buying an annuity is a one-way ticket to the end of your life, with no refunds.”

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