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Defined Contribution

U.K.’s Pensions Regulator weighs whether fees charged to participants of small DC plans are fair

The Pensions Regulator in the U.K. is examining whether participants of small defined contribution plans are charged fees that are fair, TPR said in a news release Monday.

In an effort to assess whether trustees of small and micro DC plans are giving each participant the best value for the fees they pay, The Pensions Regulator will review the statements made by 100 small and micro plans, which are required to identify and address any areas of poor performance.

"From our research and experience, we believe that many small and micro schemes are failing to meet our expectations by providing a quality assessment of how their charges represent value for members. We are concerned about a tail of subscale pension schemes and strongly believe that it is unacceptable to have two classes of DC pension saver,"said Anthony Raymond, acting executive director of regulatory policy at TPR, in the news release.

The review was welcomed by the industry. Graham Vidler, director of external affairs, at the Pensions and Lifetime Savings Association, said in an email: "Assessing value is a critical part of trustees' duty to the scheme, and TPR is right to act on any concerns they may have."

Mark Futcher, partner and head of DC and workplace wealth at actuarial consultant Barnett Waddingham, said in a separate email: "The TPR must make it clear to these smaller schemes that the 'value' is not the same as 'cheap'. I would encourage trustees of smaller schemes to look at value on a 'relative' basis where their scheme is relevantly benchmarked against the alternatives in the market."

The TPR is expected to turn its findings into a report that will be released by the summer of 2018. The report will outline the examples of good practices in an effort to guide small and micro DC plans.