The Financial Conduct Authority (FCA), the Department for Work and Pensions (DWP) and the Pensions Regulator (TPR) have launched a consultation on a joint framework for workplace defined contribution (DC) schemes.
The proposed framework has been designed to move the focus from costs to long-term value and deliver better retirement savings. It is intended for use by pension providers and those making decisions on behalf of savers and aims to provide more transparency about schemes’ performance.
Schemes will be examined using public metrics that demonstrate value, investment performance and service quality, instead of just costs and charges. The aim of this is to enable providers to invest in assets which could deliver greater long-term returns but have higher management costs, such as infrastructure or venture capital.
Once the final framework is decided, they would then be publicly rated red, amber or green. Poorly performing schemes will be required to improve, or savers will be transferred to better ones.
The FCA is seeking feedback on the proposals, as well on the government’s intention to legislate so that the framework can also apply to schemes regulated by TPR. Responses will be used to support the development of a consistent approach once legislation is in place.
Sarah Pritchard, executive director of markets and international at the FCA, said: “16 million people save for their retirement into defined contribution pension schemes. We’re working with the government and the Pensions Regulator to help them get better returns. We want to see a focus on long-term value, not just costs and charges. Given the impact these changes could have, we are consulting now to ensure that the pension system can be ready to go when the legislative changes that need to happen are ready.”
Nausicaa Delfas, chief executive of the Pensions Regulator, added: “We want every pension saver to get value for money from their pensions. That means good investment returns, and high-quality services, for a competitive price. This is a great opportunity for the pensions industry to help to transform pension saving for millions, and to deliver greater value for their retirement.”
