A recent DWP consultation proposes nudging smaller DC pension schemes into consolidation.

The benefits of scale are clear and encouraging consolidation will not only benefit savers but drive efficiency in the industry. Schemes with poor data and manual processes are a drag on the performance of the whole industry and this adds costs to all participants.

Larger schemes are better able to achieve efficiency while smaller schemes are not able to contribute data to pensions dashboards, and many occupational schemes are slower to transfer DC pensions than FCA-regulated firms.

There is a growing body of evidence that smaller DC schemes are struggling to demonstrate that they provide value for members (VFM). Also, they do not often provide adequate information in their chair’s statement.

The Pensions Regulator (TPR) found in its annual survey of DC trust-based schemes that the trustees of just 10 per cent of small schemes and 33 per cent of medium-sized schemes are doing everything TPR believes is essential to assess VFM.

In its thematic review, TPR reviewed 68 chair statements, finding that for 37 per cent, no VFM assessment had been carried out and over 50 per cent of statements provided inadequate or incomplete explanations of how the costs and charges of the scheme represent good VFM.

The ABI will continue to work towards a future where all pension schemes provide value for members and good outcomes.

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