The Pensions Regulator says the industry and employers “have to accept” that many small schemes will never meet its defined contribution governance standards.
In a survey of trust-based schemes, the regulator found all master trusts and 88 per cent of larges schemes had good knowledge of its quality features for DC schemes.
However, 74 per cent of small DC schemes and 48 per cent of medium plans have little or no knowledge of the quality features.
In addition, just 39 per cent of small schemes have reviewed against the standards.
TPR executive director for DC Andrew Warwick-Thompson says: “It’s the big schemes, particularly the master trusts, that are most compliant with the code and understand and can evidence the 31 features or the majority of the 31 features.
“In relation to the small schemes, I think we have to accept that many of them will never achieve the necessary standards
He adds: “We don’t feel sufficiently confident in the small schemes market to feel that quality will be assured for those being auto-enrolled unless employers choose big schemes.”
Syndaxi Chartered Financial Planners managing director Robert Reid says: “With any small scheme there’s a question of whether they can cope and deliver on low costs. Part of the reason it’s hard is because they are running ageing systems.”