Too many defined contribution (DC) schemes, especially smaller schemes, are falling short of expectations on assessing value, a survey from The Pensions Regulator (TPR) has found.

The DC schemes survey revealed there was a lack of awareness from smaller schemes regarding new value for member assessments.

Furthermore, smaller schemes were found to be less likely to take action on financial risks caused by climate change than larger schemes.

Less than a quarter (24 per cent) of DC schemes met TPR’s requirement to assess the extent to which member-borne charges and transaction costs provide good value, with larger schemes more likely to meet the requirement.

Due to the fact that larger schemes were more likely to meet the requirement, only 11 per cent of members were in schemes that failed to meet the regulator’s expectations.

Of the schemes with less than £100m assets under management that were surveyed on the new value for member assessment requirement, 64 per cent said they were unaware of it.

Seven in 10 (70 per cent) micro schemes and 58 per cent of small schemes were unaware of the requirement, compared to 15 per cent of large schemes and 23 per cent of medium schemes.

Overall, just 17 per cent of schemes with less than £100m of assets under management that were due to have submitted a scheme return to TPR had completed the new value for member assessment by the time they took part in the survey.

“It should be noted that the value for member assessment for some schemes is due after the scheme return and at the time of completing the DC survey some schemes may not yet have been legally required to complete the assessment,” TPR explained.

Trustees of small and micro schemes not offering value are required to tell TPR whether they are winding up or transferring their members to another schemes, and if they are not winding up they must explain why and what improvements will be made.

Similar trends were seen in schemes’ climate change governance and reporting, with every master trust and 86 per cent of large schemes having allocated time or resources to assessing financial risks and opportunities relating to climate change.

However, this fell to 48 per cent of medium schemes, 4 per cent of small schemes and 8 per cent of micro schemes.

TPR noted that all scheme trustees should allocate the appropriate amount of time and resources to assessing climate risks and opportunities.

“Trustees of small schemes should ask whether the best decision they can make for their members is to put them into a better-run, better-value scheme and wind up,” said TPR executive director of frontline regulation, Nicola Parish.

“The upcoming joint value for money framework will increase transparency and competition in the market, so now is the appropriate time for trustees to evaluate whether they can compete with the best master trusts in offering value for money.”

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