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07 Jan 2013

Bigger DC Schemes Offer Higher Quality For Savers

Bigger defined contribution (DC) schemes are more likely to provide savers with good outcomes by displaying the necessary quality features, according to a study by The Pensions Regulator released last week.

Over 300 trust-based workplace DC schemes were tested for quality features in areas such as investment, governance standards, communications to members and value for money.

The research showed that 75% of big schemes had no less than 15 of the 21 features they were tested for, against 51% of medium schemes and just 18% of small schemes.

The regulator found that large schemes were much more likely than medium and small schemes to check how suitable their default fund was for their members at least once a year. They were also more likely to regularly undertake reviews of their skills and competencies and to have a mechanism for the identification and management of conflicts. In addition, more large schemes had procedures and controls in place to monitor the effectiveness and performance of advisers as well as a formal process in place for identifying and recording operational, financial, regulatory and compliance risks. Big schemes were also found to offer a higher quality in terms of value for money, contributions and communications with members.

The findings support the regulator´s view that schemes that benefit from economies of scale are more likely to be characterised by good governance and to offer value for money, chief executive Bill Galvin commented. Meanwhile, the study found that small and medium schemes often failed to display the necessary quality features, he added.

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