Spring Budget 2024: The Pensions Regulator (TPR) and the Financial Conduct Authority (FCA) will have a full range of regulatory powers to ensure employers are adhering to the Value for Money (VFM) framework.
Chancellor of the Exchequer, Jeremy Hunt, announced the plans in order to address pension schemes that are “persistently offering poor outcomes for savers”.
The VFM framework will highlight where pension schemes are focused on short-term cost savings at the expense of long-term investment outcomes, and where schemes’ current scale may be preventing them from offering value to savers.
TPR and FCA will be able to draw on regulatory powers which include closing a scheme to new employer entrants and, where necessary, winding up a scheme.
Helen Ball, partner at Sackers, said: “The new value for money framework has already been under discussion for some time, but the Chancellor also proposes to prevent consistently poorly performing schemes from taking on new business from employers.
“We await further details about how regulators will identify poor performers but understand both TPR and the FCA will be provided with a range of intervention powers. The hope is that member outcomes will improve if the government succeeds in creating a savings culture. But ensuring schemes meet appropriate standards of governance and performance is only one side of the coin, engaged members making appropriate contributions is the other.”
Simon Hubbard, a principal consultant at Quantum Advisory, added: “The announcement from the government will help concentrate DC pension funds on delivering the best returns for members while encouraging further investment in the UK economy.
“We welcome the aim to target good investment returns for every member. Careful consideration will need to be given in the coming months on how to encourage this for DC schemes while allowing funds to invest in long-term growth assets that may be volatile in the short-term.”