The Pensions Regulator has called for small pension schemes to quit the market after new research findings.
The regulator says a new study revealed the “unacceptable” scale of under-performance in small pension schemes, highlighting why they must improve or leave the market to protect savers.
 
The annual defined contribution (DC) survey, published by TPR today, also revealed that larger pension schemes, such as authorised master trusts, are more likely to be run well and provide good value for members.
 
Almost three quarters of savers (71%) are in pension schemes which are meeting all of the expected governance standards, an increase from 54% of savers in 2018 and 32% in 2017.

Generally, the extent to which schemes meet governance standards increases with scheme size, TPR says.
 
Most smaller schemes failed to meet standards of governance and trusteeship, with just 4% of micro schemes (which have between 2 and 11 members) and 1% of small schemes (which have between 12 and 99 members) meeting all of the governance standards.
 


David Fairs, executive director for regulatory policy, analysis and advice at TPR, said: “These figures clearly show that people saving for their retirement are generally far better served by big schemes than small.
 
“This long tail of smaller schemes which do not meet the standards we expect is simply unacceptable.
 
“This research highlights why our current Future of Trusteeship and Governance consultation is so important.

“We need to reduce the number of poorly run schemes so that no saver’s retirement is put at risk by bad scheme governance.
 
“All trustees – of pension schemes big and small – should be taking their role tremendously seriously and ensuring that they are running their scheme properly so savers get a good retirement.”
 
The survey also showed that the trustees of 43% of small schemes had considered winding up.

However, those schemes were more likely to meet the required standards than schemes of the same size that have not considered winding up.
 
Mr Fairs added: “The statistics clearly show that those trustees which are running small schemes to a comparatively higher standard are trying to do the right thing for their savers by winding up.

“They recognise that savers will generally get better value in a larger, better-run scheme which can benefit from economies of scale.
 
“The most disengaged trustees are blissfully unaware that they are failing savers by not running their schemes properly.”