The regulator published a discussion paper, Enabling Good Member Outcomes in Work-based Pension Provision, on Friday. The paper identifies six elements that it believes are important for achieving good outcomes for savers, and explores the ability of the different segments of the defined contribution (DC) market to provide these elements in the pension products they offer.
The introduction of auto-enrolment in 2012 will result in the number of people saving into DC schemes rising dramatically. As a result of the Government’s workplace pension reforms, it is expected that five million to eight million people will be newly saving or saving more, in all forms of workplace pension scheme. There are currently 2.5 million DC memberships in occupational pensions (also known as trust-based schemes) and three million in work-based personal pensions (also known as contract-based schemes).
The regulator is asking for views on appropriate decisions with regards pension contributions; appropriate investment decisions; the efficient and effective administration of DC schemes; protection of scheme assets; value for money and appropriate decisions on converting private pension savings into a retirement income.
The National Association of Pension Funds, which speaks for 1,200 workplace pension schemes and 15 million members, welcomed the paper. Darren Philp, director of policy at the NAPF, said: "Defined contribution pensions are becoming more and more important but their standards vary greatly so it is important to try to raise them.
"With millions sent to join a pension in the next few years, people need to be assured they are getting value to money and that they stand the best chance of a good retirement."
Despite auto-enrolment being just a year away, two-thirds of UK businesses do not seeing making change to their DC scheme as a priority for 2011, according to research by Aon Hewitt. A quarter of businesses questioned by the HR consultancy had yet to consider the implications of auto-enrolment and only 5% had already made changes to their scheme.
The Pensions Regulator welcomes comments from all those involved with DC provision including employers, trustees, advisers, providers and stakeholder groups by Friday, April 22. After receiving feedback to this discussion paper, the regulator intends to consult on any further specific proposals during 2011, culminating in publication of an updated approach to DC regulation.