05 February 2019

DWP plans for small scheme consolidation ‘risk being feeble tick box exercise’

4 min read

 
Steve Webb - Director of Policy

Steve Webb

Director of Policy, Royal London

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A consultation paper published today by DWP on infrastructure investment by pension schemes includes proposals to encourage small scheme consolidation which could be a ‘feeble tick box exercise’ according to Royal London’s Director of Policy, Steve Webb. Under the plans, once every three years the chair of a pension scheme would have to certify that the scheme had considered whether it was acting in the best interests of members by continuing to operate at its existing scale, rather than consolidate into a bigger scheme. But the same DWP report admits that 80% of small pension schemes fail to comply with the majority of their existing governance requirements, so it is hard to see that adding another one is likely to improve matters.

Commenting, Steve Webb said:

‘The Government admits that large numbers of small pension schemes already fail to meet even basic rules and regulations about how they operate. Giving them another duty to review their scale once every three years risks being no more than a feeble tick box exercise. It is hard to see that enforcing this would be a priority for the Pensions Regulator which is busy dealing with multi-billion pound deficits across the world of DB pensions. If the Government is serious both about poor governance in small schemes and about scale in pensions, a much tougher regime to consolidate small schemes will be required’.

Notes to Editors

A consultation document entitled ‘Investment Innovation and Future Consolidation’ has been published today (5th February) by DWP.

About Royal London:

Royal London is the largest mutual life, pensions and investment company in the UK, with funds under management of £117 billion, 8.8 million policies in force and 3,745 employees. Figures quoted are as at 30 June 2018.

For further information please contact:

Steve Webb, Director of Policy, Royal London