The OFT’s assessment of potential risks in the Defined Contribution workplace pension market is welcome but its recommendations could have gone further, argues the National Association of Pension Funds (NAPF) today (Thursday).
In its consultation response, the NAPF says it agrees with the OFT market study that issues such as high charges in legacy schemes and the lack of scale and resource in small schemes urgently need to be resolved. It welcomes the long-term principles outlined in the OFT’s report, such as those for ensuring greater flexibility, increased economies of scale, independent governance and alignment of incentives between all parties.
However, the NAPF is disappointed that the OFT did not go further in its short- and medium-term recommendations and is concerned that those on governance and charges may fail to deliver the right outcomes for savers. In particular, the NAPF warns that placing governance committees at provider level could lead to conflicts of interest and that a ban on Active Member Discounts could penalise consumers where employers have chosen to pay part of the charges for their existing employees.
Joanne Segars, NAPF Chief Executive, said:
“We are pleased that the OFT study reflects some of our major long-standing concerns. But the success of its short- and medium-term recommendations will depend on how they are implemented by the Government and the industry. There are several barriers that need to be overcome before we can achieve the right outcomes – especially around governance.
“It is essential that the Government and regulators bring in policies that ensure sustainable and good DC pension provision in the long term. Acting quickly will ensure that pension savers, especially those who will be saving into a pension for the first time through automatic enrolment, benefit from these improvements from the outset.
“The NAPF believes that governance, transparency of charges, value for money and economies of scale are critical to delivering good workplace DC pensions, so we urge the OFT to continue to monitor progress in the DC landscape.”
Notes to editors:
1. The NAPF is the leading voice of workplace pensions in the UK. We speak for 1,300 pension schemes with some 16 million members and assets of around £900 billion. NAPF members also include over 400 businesses providing essential services to the pensions sector.
2. Please download the NAPF’s Response to the OFT’s DC Workplace Pension Market Study.
Dee Sullivan, Head of Media and PR (interim), 020 7601 1717 (goes through to temporary mobile outside office hours), [email protected]
Aimee Savage Richards, Press Officer (interim), 020 7601 1718 or 07825 171 446, [email protected]