Pension scheme managers face a mountain of pressing regulatory work such as preparing data for the pension dashboards and new environmental, social and governance (ESG) reporting challenges, but there is a risk that this can divert attention from the day-to-day monitoring of a scheme’s providers.
Ruston Smith, non-executive chair of the Tesco Pension Fund and a former chairman of Pensions and Lifetime Savings Association (PSLA), highlights the need for employers generally to maintain focus on member outcomes in retirement, particularly in regard to auto-enrolment schemes that may have been set up nearly a decade ago.
“As employers have appointed their provider of choice since automatic enrolment was introduced in 2012, the key question is how are employers continuing to monitor their chosen provider to make sure members continue to get value for money, and, as part of that, good member service, past and future expected investment returns and importantly member outcomes?” Smith says.
“Employees have trusted their employer to choose the best provider for them and, no doubt, will [want] them to continue to monitor the provider on their behalf. How many third-party contracts are awarded with no ongoing monitoring, with unsurprising risks of not doing so. A number of [organisations] have set up a governance committee, with the right skills, experience and external advice to provide necessary ongoing monitoring, and others have also conducted formal three-yearly tender reviews.
“Member outcomes, between different providers, will be clear to see over time, which will influence members’ of life in retirement,” Smith says.
When Tesco closed its defined benefit (DB) scheme in late 2015 and appointed the Legal and General master trust as its provider for the defined contribution (DC) Tesco Retirement Savings Plan, it set up a DC governance committee which has an independent representative with a background in investment, member nominated representatives and has appointed external consultants. The Tesco Retirement Savings Plan now has over £2.5 billion of assets.