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21 Jan 2013

OFT To Investigate DC Schemes

The Office of Fair Trading (OFT) last Thursday initiated a probe into the quality of defined contribution (DC) workplace pension schemes amid reforms in the market resulting from the introduction of automatic enrolment.

As a result of auto-enrolment, the value of annual contribution into DC schemes, into which about four million UK employees are currently saving, is expected to increase by about £11 billion by 2018.

In the study, the OFT´s focus will be on the value for money delivered by DC schemes and the size of savers´ pension pots when they retire. The OFT also said that it would look at competition between pension providers and developments in the market, on the pressure pension providers face to maintain low charges and how much information they provide to savers. Smaller firms will also be the centre of attention in terms of the pension decisions related to their workers as well as in view of the help and advice they receive to set up and maintain pension schemes. The OFT will also study barriers employees face to switch from one scheme to another and employers´ potential lack of engagement in creating and managing pension schemes.

The Department of Work and Pensions, the Pensions Regulator, the Financial Services Authority and others will help the OFT in its investigation, while the National Association of Pension Funds, the Association of British Insurers, pension providers, trade bodies and employer and employee representatives will also be asked to contribute. The study is expected to be completed by August 2013.

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