The Pensions Regulator: Supporting Defined Contribution Savers in the current economic climate

United KingdomScotland


On 12 January the Pensions Regulator issued a statement continuing to challenge trustees to support members with DC benefits. The statement lists a number of actions which the Regulator says it expects trustees to take, particularly in light of recent market movements. Trustees of schemes with DC benefits need to review the statement and make sure they comply with the Regulator’s expectations. You can access the Regulator’s statement here.

The statement

Using the existing governance framework, the Regulator’s statement challenges trustees to take action to ensure that sufficient time is devoted to DC governance. There is particular focus on reviewing investments and communications with members to support understanding of benefits and options.

The key actions for trustees are:

  • Review the scheme governance structure, considering the DC code. Consider if the scheme has sufficient scale, time, and resources to govern the DC arrangements. The Regulator says this is particularly the case for hybrid schemes, given governance challenges experienced during the recent LDI crisis.
  • Review performance of investment advisers to ensure there is a focus on good member outcomes, rather than just costs and charges. This includes reviewing strategic investment objectives and ensuring the remit of the investment adviser allows for proactive advice. The trustee guidance for setting objectives for investment consultants has also recently been updated.
  • Obtain more data to understand the characteristics and demographics of scheme members, including information on how and when members plan to access benefits. This includes things like pot size, age, and any information on member behaviours in accessing benefits and whether these have changed in the current economic climate.
  • Consider the change in investment outlook caused by the current market environment.Reflect on how this impacts the ongoing requirements for the default strategy and performance, as well as the range of self-select options.This might include an out of cycle review to respond to current market conditions and should reflect how it impacts different member groups. For those DC master trusts where participating employers use their own investment adviser to select a default fund, the master trust should obtain confirmation from the adviser that the default fund remains suitable.
  • Strengthen member support and target efforts towards those most in need of help. Trustees should consider how best to supplement the new simpler annual pension benefit statement to help members gain better insight, which may include access to modelling tools and information.Help for members might also involve signposting appropriate decumulation options.
  • Review member communications – with trustees told they should “act now to ensure member expectations are better aligned with where they are invested”. Communications should engage with members to support understanding and ensure members are able to make informed decisions.The Regulator says that communications need to help members understand the impact of default strategies, the risks of cash investments, the impact of member decisions, transfer and scam risks and highlight sources of further information. In addition to the support available from MoneyHelper, schemes should also provide support and modelling tools to allow better management of expectations by members.