The Pensions Regulator (TPR) has today published the findings of research examining how defined benefit (DB) schemes of different sizes are impacted by administration and other running costs.
Commenting on the research, Malcolm Rochowski says:
“TPR’s research indicates that trustee knowledge of the DB scheme expenses they are paying is not great. Sponsoring employers of DB schemes are in an even more difficult position, as they often have no hands-on involvement in the scheme expenses, despite being ultimately responsible for paying them. For schemes open to accrual, an allowance for expenses may be wrapped up in the ongoing contribution rate. For schemes closed to accrual or with relatively few active members, the employer may simply pay a fixed sum in relation to expenses, which might only be reviewed every few years at the most.
It is important that employers engage with trustees over scheme expenses – not necessarily to drive them down, but to ensure that decisions being taken on the level of services to procure are consistent with the employer’s expectations. Investment management fees are a key area where employers should take a view and make an explicit decision on the level of management desired (e.g. active versus passive at the most basic level) and the corresponding level of fees to be incurred.”