Commercial pension providers should be given a trustee-like fiduciary duty to act in the member’s best interests, says the National Association of Pension Funds.
In its response to the Government’s call for evidence into quality standards in workplace defined contribution (DC) pension schemes, the NAPF says the current landscape is fragmented and warns of a growing governance gap, with schemes increasingly being used for auto-enrolment without good governance, it argues.
Its submission to the consultation, which closed today, calls for fewer, larger and well-governed schemes and cites strong evidence that members of larger schemes are likely to benefit from economies of scale.
NAPF director of policy Darren Philp says: “With millions of people being auto-enrolled into DC pensions over the next few years, it is essential that pension schemes are capable of getting good results for savers. We are pleased that the Government is considering minimum legal standards for DC pensions.
“Securing good outcomes for pension savers requires strong governance. More needs to be done to raise standards of governance across the piece and ensure there is always someone effectively and independently representing the member.
“While trustees have a duty to uphold members’ interests, more can undoubtedly be done to ensure that trustees have the time and resources to properly consider their DC schemes. There is an inherent governance vacuum in contract-based schemes but the situation is not unmanageable – there are many excellent contract-based schemes where the employer steps up and takes responsibility for governance. It makes sense that governance sits at employer-level in these schemes.
“The emerging mastertrusts should prove to be good auto-enrolment solutions for those employers not used to dealing with pensions, but we need to ensure that they meet minimum standards, deliver value for their members, and have strong independent governance.”
“We think the Government needs to revisit a couple of its proposals, for example whether it is feasible to give commercial providers a trustee-style fiduciary duty. But we support the broad direction of travel and will work with the Government to overcome these obstacles.”