Pensions regulator warns sub-scale schemes offer bad value to members

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The Pensions Regulator has said that tackling “sub-scale” schemes that offer bad value for money is one of its top priorities over the next three years.

In its corporate plan, which looks ahead to 2020, TPR lists sub-scale schemes at the top of its risks section.

TPR says that economies of scale are often needed to generate benefits for consumers.

The plan reads: “The continuance of sub-scale defined benefit and defined contribution schemes, predominantly, but not exclusively a feature of the small and medium enterprise market, is likely to give rise to the risk of poor outcomes for members and sponsors. Both groups will suffer detriment, principally as the result of poor value for money, if they cannot benefit from scale.

“As the landscape evolves, so do the risks faced by the pensions industry and by us as a regulator. We will be responding to these with the work outlined in our priorities.”

The other principal risks TPR has identified include poor standards of stewardship, disorderly scheme failures, poor data integrity and security, and uncertain investment decisions.

The plan also confirms an increase in budget for TPR for the 2017/18 financial year.

TPR spent £76.2m in 2016/17, £3m under its projected £79.3m. This is set to rise to £84m next year, as staff salaries rise from £35.5m to £42.7m.