The Pensions and Lifetime Savings Association (PLSA) has cautioned that consolidation or scheme scale should not be "an end in and of itself”.

The warning, which came as part of the organisation’s response to the Department for Work and Pensions’ (DWP) consultation on improving defined contribution (DC) scheme members’ outcomes, included the claim that quality could include scheme benefits and guarantees that are available to members in smaller schemes.

Its response stated: “Though we agree that there can be benefits to scale in terms of governance, access to expertise and availability of particular investment approaches, it is quality – and not the size of the scheme – which matters.”

The PLSA also called for further clarity and guidance on how schemes should ensure that the views of their sponsors and members are taken into account when making decisions about winding up or consolidating.

In order to help calculate how schemes offer value for money, the organisation also agreed with proposals for additional reporting of net returns to help members and schemes make comparisons, though it called for this to be expressed in a “meaningful and readily understandable way”.

“The government should also design requirements for net returns that are based on information easily accessible to schemes, reflect the purpose for which the reporting is intended, as well as with appropriate flexibility – in for example, time horizons - for the circumstances of different investments,” said the PLSA’s response.

PLSA head of DC, master trusts and lifetime saving, Lizzy Holliday, commented: “The PLSA welcomes the government’s intention to provide greater clarity for scheme trustees around how to conduct value for members assessments – and to put this guidance on a statutory footing.

“Where schemes are not currently able to demonstrate they are delivering good value, they should act to improve rapidly and cost effectively.

“However, the PLSA cautions that the proposed methodology for assessing value has limitations that may lead to some schemes pursuing consolidation that is not in the best interests of their members. Consolidation or scheme scale should not be an end in and of itself."

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