Enabling good outcomes for members of DC schemes Andrew Warwick-Thompson Executive Director, DC...
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Transcript of Enabling good outcomes for members of DC schemes Andrew Warwick-Thompson Executive Director, DC...
Enabling good outcomes for members of DC schemes
Andrew Warwick-Thompson
Executive Director,
DC Governance and Administration
Corporate Adviser Summit
October 2013
This presentation remains the property of The Pensions Regulator. The content of these slides should not be reproduced without express permission
Current landscape
DB Hybrid DC occupational
DC work-based personal pensions
DC memberships
Public Sector
Schemes 5,590 1,620 39,000 1,780 Total 330
Total memberships
8.0m 3.6m DB
1m DC
1.4m 2.6m 5m 12.7m
Active memberships
1.4m 0.4m DB
0.5m DC
0.6m 2.6m 3.7m 5.1m
• The long-term shift in the landscape places greater prominence on DC
• There are 36,000 occupational micro DC schemes
• Active membership is expected to increase significantly as automatic enrolment is introduced
The DC landscape
This presentation remains the property of The Pensions Regulator. The content of these slides should not be reproduced without express permission
*central estimate
Source: The Pensions Regulator projections
Anticipated growth of the major DC segments
0
2,000,000
4,000,000
6,000,000
8,000,000
10,000,000
12,000,000
14,000,000
16,000,000
2012/13 2013/14 2014/15 2015/16 2016/17 2017/18
All Master trust Other trust Contract-based
Total active membership in DC schemes through staging
This presentation remains the property of The Pensions Regulator. The content of these slides should not be reproduced without express permission
The DC journey
• January 2011 - published discussion paper ‘Enabling good member outcomes in work-based pension provision’
reviewed DC regulatory strategy to tackle current and future challenges in the DC landscape, particularly impact of automatic enrolment from 2012
identified six elements necessary to achieve good member outcome of adequate income in retirement
• appropriate contribution decisions
• appropriate investment decisions
• efficient and effective administration
• value for money
• appropriate retirement decisions
• protection of assets
segmented the market based on scheme type / employer engagement
assessed risk to achievement of good member outcomes for each segment
This presentation remains the property of The Pensions Regulator. The content of these slides should not be reproduced without express permission
The DC journey continued
• Responses to the discussion paper
Strong consensus that the six elements of a good member outcome were right
Suggested that we refine the segmentation approach
• We challenged industry to define how they might:
Embrace voluntary accreditation of auto-enrolment schemes
Better enable trustees and employers to compare value for money from schemes
Better clarify accountabilities in DC provision
• November 2011 – published six DC principles
Standards and characteristics of a good DC scheme
• June 2012 – published draft DC features
Features that underpin the six DC Principles
– January 2013 – DC consultation
DC code, regulatory guidance, regulatory approach
This presentation remains the property of The Pensions Regulator. The content of these slides should not be reproduced without express permission
TPR/DWP joint publications revised timetable – Proposal
Lay DC Code
Consultation response published
Defined Ambition &
Quality Standards
Quality Standards
Call for Evidence
C&E Policy published
DC Toolkit modules
DC Regulatory Strategy published DC Regulatory
Guidance
July August September October November
Compliance & enforcement
policy targeted consultationEmployer and Adviser
guides & Management Committee Guidance
DC Code Summary
DC Code “made”
This presentation remains the property of The Pensions Regulator. The content of these slides should not be reproduced without express permission
To protect the benefits of members of work based pensions
To protect the benefits of members of work based pensions
Our regulatory approach
• We are committed to increasing confidence and participation in work-based pensions
EDUCATEEDUCATE ENABLEENABLE ENFORCEENFORCE
To promote, and improve the understanding of, the good administration of work-based schemes
To promote, and improve the understanding of, the good administration of work-based schemes
Codes of practice
Codes of practiceWeb toolsWeb tools
Trustee toolkit
Trustee toolkitGuidanceGuidance Thematic
reviews
Thematic reviews
Use of powers
Use of powers
Regulatory statements
Regulatory statements
Risk toleranceEnable good
member outcomes
Enable good
member outcomes
Prevent serious
loss
Prevent serious
loss
This presentation remains the property of The Pensions Regulator. The content of these slides should not be reproduced without express permission
Our DC priorities
This presentation remains the property of The Pensions Regulator. The content of these slides should not be reproduced without express permission
Topics for discussion
• Good member outcomes
• Pension liberation fraud
• Small schemes
• Retirement choices
• Value for money
• Anything else?
This presentation remains the property of The Pensions Regulator. The content of these slides should not be reproduced without express permission
Good member outcomes
Value for money
Effective and efficient
administration
Appropriate investment decisions
Appropriate contribution decisions
Adequate retirement
income
Protection of assets
Appropriate decumulation
decisions
This presentation remains the property of The Pensions Regulator. The content of these slides should not be reproduced without express permission
Pension liberation fraud
This presentation remains the property of The Pensions Regulator. The content of these slides should not be reproduced without express permission
Base: All DC schemes (152); *All DC schemes that document their internal controls (110)
Small schemes
% yes Small DC Medium DC
Large DC
Board meets at least every 6 months
34% 68% 94%
Documented internal controls 54% 72% 90%
Risk register in place* 56% 64% 96%
Documented service standards (admin)
52% 78% 90%
Formal documented policy on TKU 24% 32% 60%
Reviewed SIP in last 3 years 48% 62% 85%
This presentation remains the property of The Pensions Regulator. The content of these slides should not be reproduced without express permission
Retirement choices
Current initiatives to drive better member outcomes
• ABI code of conduct on retirement choices/annuity window
• DWP/HMT OMO review group
• FCA thematic review of annuity market
• Money Advice Service guide
• TPR revised retirement guidance
Longer term
• Re-thinking decumulation
• Effective de-risking
• Emergence of Managed DC
• Innovative product development when scale is reached
This presentation remains the property of The Pensions Regulator. The content of these slides should not be reproduced without express permission
Value for money
A scheme offers value for money where member-borne costs and charges deliver good value in relation to the benefits provided to members, relative to other options available in the market
The regulator’s role:
Working with the market, to deliver an approach that allows employers and trustees to undertake meaningful value for money assessments on an ongoing basis.
The regulator does not seek to specify what represents value, but will seek to intervene where employers and trustees are frustrated in their ability to assess it.
This presentation remains the property of The Pensions Regulator. The content of these slides should not be reproduced without express permission
Value for money continued
• Progress is required so that:
– All costs and charges (product and scheme) are captured and consistently reported
– Costs and charges are attributable to specific benefits
– Investment returns are captured and their benefits relatable to costs
– Comparison via benchmarking is facilitated
• However: absent effective demand-side pressure – even this may not be enough, hence the DWP’s consultation on a charge cap for qualifying schemes.
Do similar schemes with similar charges
deliver similar benefits?
Value for money: a potential process
TPR Publish Segmented Data
Trustees/employer; negotiate/change
provider/do nothing
What are my members getting?
What are my members paying?
Do similar charges deliver similar
outcomes?
This presentation remains the property of The Pensions Regulator. The contents of these slides should not be reproduced without express permission.
Enabling good outcomes for members of DC schemes
Andrew Warwick-Thompson
Executive Director,
DC Governance and Administration
Corporate Adviser Summit
October 2013