The Pensions Regulator urged consultants and providers to respond to its current discussion paper on how the DC sector can deliver and measure value for money for members.
Speaking at Corporate Adviser’s Master Trust and GPP conference Louise Sivyer interim head of policy at TPR says she wanted a more joined up approach between the TPR and the FCA to help deliver ensure a “consistent framework” for assessing value for money across the DC market.
She confirmed that at present it was focusing on the accumulation stage, but would be looking to extend this to decumulation options in future.
Running through the key factors of the current discussion paper on VFM, Siyver say the three key pillars were investment performance, scheme oversight and costs and charges.
To date, much of the focus has been on this latter issue, but Siyver says the regulator is keen to get feedback from the industry on how they can more effectively monitor these first two aspects.
“For example when looking at performance what sort of benchmark should be used and what are the benefits of looking performance net or gross of charges?”
She said the trickiest areas would be assessing service and oversight. “There are more difficult to assess in a quantitative fashion.”
One key proposal was to have an accreditation system in place, similar to the kite-mark standards provided by the British Standards Council. This would look at whether schemes were delivering on a host of different areas, from members communications, scheme administration and governance and oversight. Within this latter area would be a consideration of the decision-making around ESG and DE&I considerations, particularly around those making decision for the scheme.
However some of those attending the conference questioned whether there was an inherent tension in asking trustees to be measured on both their ESG metrics and their performance as in some cases these may be “diametrtically opposed”.
Sivey says she fundamentally disagreed that these were in conflict over the longer-term. “The regulator things that the two do fit together. We are asking trustees to look at this as part of their fiduciary duty. There is a lot of risk and opportunity in climate change.” She added that the regulator was interested in long-term trends when it came to these issues not snapshot short-term positions based on a year or two’s performance. She added there were no plans to issue fines to those that failed to meet VFM standards, although there will be requirement to compare offering and pressure for schemes to consolidate who were not meeting these targets.
She said the aim of this discussion paper was to help deliver better data to assess and compare schemes. This should also improve the regulation of these schemes she said.
When it comes to service and oversight she added: “We are expecting schemes to go beyond the minimum but we are not looking for them to be gold-plated. Having an accreditation scheme may help stop schemes competing for business on factors which do not deliver such a significant difference in terms of member outcomes.