Pension reforms 'put onus on trustees, providers and employers to show value for money'

International law firm RPC says Government consultation is 'welcome' step towards ensuring pensions industry is providing the best outcomes for customers

Commenting on Government proposals to introduce value-for-money tests for pension funds, partner Rachael Healey, said:

"The Government has unveiled a welcome series of consultations on pension reforms targeting small pots, collective defined contribution schemes (merging existing pension schemes within employer groups) and value for money metrics.  

"Pension administrators, trustees and pensions providers will perhaps be most interested in the proposed framework for value-for-money comparisons between workplace pension schemes.  

"The reforms are a reaction to the fact many do not actively participate in their pension pot. Given the onset of auto-enrolment over a decade ago there is concern that pension savers are not getting value for money – and with that the industry is not providing the best outcomes for customers.  

"Interestingly, the proposals also include new powers for the Pensions Regulator to wind-up schemes not providing value for money and for contract-based defined contribution schemes under the FCA's remit, permitting the FCA to require the transfer out of members.  

"The aim of the proposals appears in the long term to be the consolidation of pension schemes, to benefit from economies of scale when it comes to service and cost. 

"But the short-term impact is to put the onus on trustees, providers and independent governance committees to show value for money when it comes to cost, quality of service and investment returns - and also potentially on employers to show they are using the right pension provider for their employees."