The Pensions Regulator (TPR) has argued that challenge and disclosure must become the “norm” if savers are to get value for money (VFM) from their pensions, confirming that it will increasingly use VFM disclosures to "constructively challenge" pension trustees.

In a blog post, TPR chief executive, Nausicaa Delfas, argued that the pensions industry is at an “inflection point”, as it moves from a pensions landscape of thousands of small schemes towards a concentrated marketplace of complex financial institutions.

“As we manage this transition, one guiding principle needs to run through all that we do – that schemes should drive value for money for pension savers,” she stated. “But how do we achieve value? Through challenge and disclosure.”

Delfas also highlighted the role of the value for money framework currently being developed by TPR, in partnership with the Department for Work and Pensions and the Financial Conduct Authority (FCA), which will aim to enable schemes to compete on metrics that matter and move the focus from cost alone to genuine value for money.

She stated: “We are working in partnership with the FCA on their forthcoming consultation, and urge master trusts and large defined contribution (DC) pension schemes to engage with that process.

“Through this framework, the open availability of performance data will allow schemes to compare themselves to the rest of the market. It will also inform trustees’ decisions on whether savers would be better served by consolidation into a larger scheme.

“Disclosure is here to stay and should be seen as an opportunity rather than a burden."

Delfas also confirmed that TPR will increasingly use disclosure of value for money and other data to "constructively challenge" trustee decision-making so that savers’ interests are really being met.

However, she emphasised that the regulator also expects trustees to be asking "tough questions" of themselves and their advisers.

"In a complex world, we need trustee boards to constructively challenge the advice and investment options presented to them," she added.

"TPR does not take a prescriptive approach or instruct trustees on how to invest pension savings. But we do expect trustees to have the right skills, governance structure and access to expertise to consider all asset classes."

For instance, Delfas noted that the regulator’s guidance on private market investments, published in January, called on trustees to ensure they have an appropriate level of knowledge and understanding to be able to work with their advisers to fully consider how accessing private market assets may meet their needs.

She also argued that trustees who can navigate this complexity will be able to "reap the rewards of the greater resilience and new opportunities that diversification brings", including the potential for higher risk-adjusted returns.

She continued: “Increased visibility and comparability of data can help to drive competition, innovation and adoption of good practice.

“Where the data is telling trustees that their scheme does not offer good value, or where trustees, working with their advisers, do not have the skills and resources to explore more diversified investments, trustees should ask themselves a further tough question: would their savers’ interests be better served through consolidation?”

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