Trustees of defined contribution (DC) and hybrid schemes with assets of less than £100m will soon face more onerous ‘value-for-members’ (VfM) obligations. In short, they will have to weigh their charges, transaction costs and investment returns against those of larger schemes, and justify (to the Pensions Regulator) their continued existence if they fall short. The changes are part of a wider package of measures that are, generally, set to come into force in October 2021; the augmented VfM obligations will apply to the first scheme year ending after 31 December 2021.

What has happened?

In June 2021, the Department for Work and Pensions (DWP) announced the outcomes of two consultation exercises: Improving outcomes for members of defined contribution pension schemes (which ran from September to October 2020), and Incorporating performance fees within the charge cap (conducted from March to April 2021). The necessary legislation has been laid before Parliament for its approval, and guidance on the changes published.