Workplace Defined-contribution Pension Schemes

Steve Webb Excerpts

Thursday 4th July 2013 Written Statements

[The Minister of State, Department for Work and Pensions (Steve Webb)]

I am pleased to announce that today the Government will publish a call for evidence into quality standards in workplace defined-contribution pension schemes.

Automatic enrolment will lead to 6 million to 9 million people newly saving or saving more, primarily in defined-contribution pension schemes. Coupled with the introduction of a system of automatic transfers between workplace pension schemes, it is more important than ever that workplace pensions deliver a good experience for all their members.

While most schemes offer a good deal to savers, I am concerned there may be some—now or in the future—that do not deliver the standards that should be expected. Unlike other financial products, people who are automatically enrolled or automatically transferred into a workplace pension will not have made an active choice about which scheme to join. In addition, the long-term nature of pensions means it may not be clear how good an outcome a scheme will deliver for members until they have paid into it for many years. It is therefore particularly important that sufficient protections are in place to ensure that schemes are run in a way that is beneficial for members. The Government want to ensure that every defined-contribution scheme used for workplace saving delivers value for money and meets some essential minimum legislative standards.

Charges are one important aspect of this. On 1 July I laid draft regulations to prevent the use of consultancy charges in automatic enrolment schemes. The Government also plan to publish a consultation on charges this autumn, following the Office of Fair Trading’s investigation into the workplace defined-contribution pensions market. This consultation will set out proposals on charges, including for introducing a charge cap.

The Pensions Bill currently before Parliament includes provision to specify minimum legislative standards for workplace money-purchase schemes, as part of the Government’s proposed system of automatic transfers. Responses to the call for evidence will form an important part of the development of a set of minimum standards that all such schemes will have to meet. In particular, we are seeking evidence and views on scheme governance, default strategies, administration and record keeping, and scale as these are the areas we are considering for minimum legislative standards.

I will place a copy of the call for evidence in the Libraries of both Houses. The call for evidence will also be available on the gov.uk website later today at the following address: https://www.gov.uk/government/ publications.