XPS Pensions Group calls for Department for Work and Pensions to implement a more tailored approach for DC schemes
XPS Pensions Group are fully supportive of the DWP and broader government’s attempts at improving member outcomes, as set out in its recent call for evidence on the ‘Future of the defined contribution market’. However, we would ask DWP to consider that DC occupational pension schemes of all sizes can provide good outcomes for members, and using a one dimensional approach to seeking consolidation - as seems to be the case here - may both be harmful to members and unlikely to meet the government’s goals.
Sophia Singleton, Head of DC, XPS Pensions Group said “We are seeing many employers and trustees working to consolidate their arrangements into master trusts ahead of the governance changes on value for members coming in towards the end of this year. However, as the DWP states there are over 1,560 DC schemes that will be affected, and with less than 30 commercial master trusts, on average, each will need to take in over 50 new schemes. While the market can manage this challenge, the process should not be rushed as that will undoubtedly lead to poorer member outcomes.”
Sophia Singleton added “We also question whether those current schemes that have engaged employers who want to support their members and provide good value through their occupational scheme should be ‘incentivised’ to stop doing so. This terminology could be seen as too direct and biased for many DC schemes which are committed to delivering better member outcomes. We believe that the DWP should continue to support all schemes with clear guidance and policy making that focusses on the real drivers of member outcomes – including employer commitment and engagement methodologies as well as net returns.