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TPR ratchets up pressure on default investment governance

TPR’s David Fairs

The Pensions Regulator is scrutinising scheme trustees more in a drive to ensure they are meeting their legal obligations and properly governing default arrangements.

The watchdog has contacted trustees of hundreds of schemes and asked them to confirm that they have reviewed their default arrangements.

The move is part of TPR’s ongoing work to protect savers and ensure workplace pensions work.

Under law, a pension scheme which provides money purchase benefits must review its default strategy and the performance of its default arrangement every three years.

A review is also necessary when there is a significant change in a scheme’s investment policy or demographic of its membership.

More than 500 defined contribution schemes with between two and 999 members have been contacted as part of the pilot where trustees have been asked to review guidance which outlines the watchdog’s expectations.

They are then asked to confirm if the strategy and performance of their scheme’s default arrangement have recently been reviewed and remain suitable, by completing a simple online declaration form.

According to watchdog figures, more than 95 per cent of members of trust-based DC schemes are saving in a default arrangement.

TPR executive director of regulatory policy, analysis and advice David Fairs says: “Our focus is on good outcomes for savers in their retirements. To provide pension savers with the best pot for retirement they need good investment returns as they contribute into a pension through their employment.

“Regularly reviewing a pension scheme’s default arrangement, which the majority of savers contribute into, is vital for trustees to ensure they are investing in the best interests of members.”

He adds: “We are working to wake up those trustees who, research has shown us, do not engage with the regulator or sometimes do not realise they are not meeting the standards of governance or administration that we expect.

“This pilot is among some of the things we are doing as part of a new approach to contact trustees about their legal duties, support them to become compliant where we can and inform them about the alternatives – including winding up their scheme – if they do not or cannot meet the standards which we expect.”

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