A helping hand with value for members assessments

What ‘value for members’ assessments are and how we can help you with them

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How do value for members assessments affect me?

If you’re running your own in-house defined contribution (DC) pension scheme with your own set of trustees, then value for members assessments could apply to your business if the scheme has:

  • assets of less than £100m
  • operated for at least 3 years
  • a year-end that falls after 31 December 2021.

The good news is that if your pension scheme is with us, then it’ll be our independent Trustee Board that carries out the value for members assessment, so you don’t have to do a thing.

What if I have another scheme running with different trustees?

Legislation requires value for members assessments to be carried out on trust-based DC pension schemes that meet the criteria above. The assessments form an integral part of trustee duties and help to ensure members are receiving good outcomes from their pension scheme.

The Pensions Regulator believes that value for members underpins all areas of scheme management, and that failure to carry out an adequate assessment suggests that Trustees may not be able to identify and address underperforming areas. This significantly increases the risk of members receiving poor value.

Trustees of these DC schemes have a legal duty to produce a value for members assessment and present their findings in their annual chair’s statement. Every year, trustees must evaluate factors such as costs and charges, net investment, and administration and governance of their scheme.

These assess these against 3 comparator schemes to determine whether they are offering the best possible value to members.

Failure to complete a value for members assessment can jeopardise positive outcomes for members but can also result in penalties that trustees are personally liable to pay and further regulatory intervention.

What does a value for members assessment look like?

Your value for members assessment must consider the following 3 factors:

  • Costs and charges
  • Net investment returns
  • Governance and administration against 7 key metrics:
  1. Promptness and accuracy of core financial transactions
  2. Quality of record keeping
  3. Appropriateness of the default investment strategy
  4. Quality of investment governance
  5. Level of trustee knowledge, understanding, and skills to operate the pension scheme effectively
  6. Quality of communication with scheme members
  7. Effectiveness of management of conflicts of interest

For more information on what to consider when assessing value, please see the detailed guidance provided by The Pensions Regulator and the Department for Work and Pensions.

What if the assessment isn’t favourable?

If an assessment reveals members are receiving poor value for money, trustees are required to take steps to rectify this. This could include winding up the current scheme and consolidating members’ assets with a different scheme if current arrangements can’t be improved.

The trustees should have had discussions with at least 1 of the 3 comparator schemes about a transfer of members’ rights, in the event the scheme decides it does not provide good value.

If you still have questions about value for members assessments or would like to learn more, please get in touch using our contact form below.

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