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TPR fears over DC protection

The Pensions Regulator has outlined concerns about the level of protection offered to investors in defined-contribution pension products as the Government prepares to roll out automatic enrolment into workplace pension schemes.

Earlier this month, the regulator issued a statement clarifying the role of the trustee in a DC scheme. TPR also plans to produce a document outlining 11 key principles for good quality DC provision later this year.

In an interview with Money Marketing at the NAPF conference in Manchester last week, TPR executive director for DC June Mulroy says: “Within a defined-benefit scheme, the liability is with the employer and behind that you have The Pensions Regulator and the Pension Protection Fund as a buffer. In defined contribution, the buffer is not always as obvious as it might be. In fact, in certain types of products that DC trustees might get involved in, there is no buffer at all because the Financial Services Compensation Scheme does not always click in.”

In its statement to DC trustees, TPR also warned that offering active member discounts is not “fair” or acceptable”. The regulator takes the same view of contract-based pension schemes which offer different charges to active and deferred members.

Mulroy says providers have been guilty of using AMDs to boost profits.

She says: “We have found that deferred members have been paying an awful lot more for nothing – there were no efforts made to find them and no efforts made to get information to them.

“Transaction charges in general have plummeted in the last 20 years but members do not seem to be getting any benefit from that. I think active member discounts have been seen too often and too easily as ways of making money.”

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