On the go: The Financial Conduct Authority and the Pensions Regulator are worried that giving savers information about how their pension schemes are performing may lead to them making “the wrong decision”.
TPR policy delivery lead Lisa Leveridge made the comments on February 7 during a webinar hosted by the Pension Playpen about the new value for money framework.
The value for money consultation paper, published by the government on January 30, proposed that pension schemes should disclose investment returns over three, five, 10 and 15 years, if available. This would be similar to the system in Australia, where if a pension scheme is not performing well the operator has to write to members with an update.
Leveridge said this is an approach the UK is considering adapting, but she noted that those involved with the consultation are cautious of giving that information to savers in case they make the wrong decision.
Des Healy, defined contribution policy manager at the Department for Work and Pensions, told those on the webinar that at the heart of what the consultation is trying to achieve is a desire to put savers at the centre and ensure they have confidence that pension scheme providers are doing the best for them.
He noted that currently there is no requirement to make comparisons between schemes in the market, but he said as they grow in scale it will be important that trustees can do that.
Addressing the fact that the consultation paper makes no reference to environmental, social and governance considerations, Healy said the rationale behind this was that they did not want unnecessary duplication.
“There are already reporting requirements on ESG,” he said. “Do we need to replicate them? If people think we have made a mistake and there is a need for ESG in the consultation, then please let us know. From our point of view we don’t want to duplicate requirements that are already out there.”
In relation to the timescale for the delivery of the framework, Healy said he expects that some of the “harder” measures proposed will require primary legislation and cross-government agreement.
He noted that there is only a certain parliamentary window before the next election, which will need to take place in 2024, and that he hopes it can be completed in that time.
As part of the proposed value for money framework, pensions schemes will be required to disclose investment performance, net of all costs.
The government has said the proposals will encourage greater transparency and standardisation of reporting across the DC pensions market and will allow trustees to make more informed decisions, while employers will be able to better compare the value and performance between schemes when choosing where to automatically enrol their employees.
The framework also proposes the disclosure of a forward-looking metric for target future performance.
While most investment performance data under the framework would be backwards-looking data, the government said it recognises that future investment performance is what ultimately matters to savers.
This article first appeared on FTAdviser.com
