LONDON--The U.K. Office of Fair Trading, or OFT, said Thursday
it has reached agreement with business and The Pensions Regulator,
or TPR, on a set of reforms to the 275 billion pound market for
defined contribution workplace pensions after its market study,
found problems which mean some savers do not get value for
money.
MAIN FACTS:
-OFT has found employers may often lack the capability or the
incentive to assess value for money.
-OFT has found weaknesses have already created a risk of savers
losing out in two parts of the market.
-OFT is also concerned similar problems might occur in the
future without measures to improve the scrutiny of pension schemes
on behalf of savers.
-To improve this market, the OFT has secured agreement to
important steps in tackling these problems:
* to address the OFT's concerns about small trust-based schemes,
TPR has agreed to take rapid action to assess which smaller trust
based schemes are not delivering value for money; Department for
Work and Pensions, or DWP, has agreed to consider whether the TPR
needs new enforcement powers to tackle the problem;
* to address the OFT's concerns about old and high charging
contract and bundled trust schemes, the Association of British
Insurers, or ABI, and its members have agreed to an immediate audit
of these schemes.
-Audit will give a full understanding of the charges and any
benefits associated with these schemes and ensure savers are
getting value for money; this will be overseen by an independent
project board; and
* to strengthen the scrutiny of pension schemes on behalf of
employees, the ABI has agreed that its members will establish
independent governance committees; Committees should recommend
changes to providers and escalate issues to regulators where they
see risks of poor outcomes for savers.
-OFT also has identified a number of practices that it thinks
will lead to savers losing out without action by the
Government.
-OFT is recommending:
* the DWP consults on improving the transparency and
comparability of information about the cost and quality of schemes
in order to make employers' initial choice of scheme easier;
and
* the DWP consults on preventing schemes being used for
auto-enrolment that contain in-built adviser commissions or that
penalize members with higher charges when they stop contributing
into their pensions.
-Write to Ian Walker at ian.walker@wsj.com
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