The Pensions Regulator (TPR) has urged small defined contribution (DC) schemes that are failing to compete with better-governed larger ones to consider winding up, after it revealed that a growing number of small schemes have been hit with fines for poor governance.

The regulator previously held a large-scale regulatory exercise to look at whether DC scheme were complying with detailed value for members (dVFM) requirements, after research in 2021 found that less than a fifth (17 per cent) of schemes required to complete an assessment had done so, and 64 per cent were unaware of this obligation.

The results of this work have now been revealed, as TPR’s latest compliance and enforcement bulletin showed that TPR increased its use of powers in relation to detailed value for members (dVFM) assessments between July and December 2024 compared with the first half of that year.

In particular, TPR revealed that it has issued penalties to 19 schemes since it launched its initiative, with fines totalling £97,750,

Commenting on this, TPR executive director of regulatory compliance, Gaucho Rasmussen, said: “All savers deserve to be in schemes with good governance.

“Where trustees cannot compete with the best in the market, either in terms of value or governance, they should consider whether a transfer to a better-value scheme and winding up is what is best for their savers.”

TPR's latest bulletin also showed a slight increase in its wider use of powers to regulate pension schemes, from 229 in the previous period to 289 in this latest period.

However, the use of the regulator's auto-enrolment (AE) powers has remained consistent, with compliance continuing to remain high.

In particular, TPR issued 31,740 Compliance Notices compared to 30,688 in the previous period, 18,254 Unpaid Contribution Notices compared to 18,589 in the previous period, and 21,504 Fixed Penalty Notices compared to 20,677 in the previous period.

In addition to this, it issued 7,608 Escalating Penalty Notices compared to 7,682 in the previous period.

"Through the compliance and enforcement demonstrated in this bulletin, this period saw 97 per cent of employers pay their workers’ contributions in on time," Rasmussen added.

Despite high levels of compliance, TPR warned that it will take action to address where employers are not doing the right thing for their staff.

TPR also confirmed that it is planning to evolve its approach to AE regulation, including looking at innovative solutions, using new technologies and improved user experience, to make it as easy as possible for employers to comply, reducing the need for direct intervention.

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