The Pensions Regulator (TPR) issued a consultation document entitled "How the Pensions Regulator will regulate defined contribution schemes in relation to risks to members" on 13 November 2006. This document sets out the TPR’s medium term strategy for defined contribution (DC) schemes. The consultation started on 13 November 2006 and ended on 2 February 2007.

If current trends in occupational pensions continue, TPR anticipate that there will be broadly equal amounts of active members in defined benefit and occupational DC schemes by 2012.

TPR has recognised that it has been concentrating its efforts on defined benefit schemes since 2005. However it’s objectives of protecting members’ benefits and promoting high standards of administration also apply to DC schemes and it wants to address these objectives.

The consultation document highlights the five key areas of risk to DC members.

• Poor administrative practices.
• Poor investment practices.
• Unduly high charges.
• Poor decisions on retirement choices.
• Lack of member understanding.

TPR intends to take a three-pronged approach to support those involved in running DC schemes. The focus being on prevention of risk to members and to provide information and guidance to help those running and providing DC schemes. Helping them to understand and to address the risks to members. However, where there are serious risks to members, TPR will intervene where necessary.

• Education and guidance – TPR propose to develop and expand their website. New initiatives such as publication of:
  
  • good practice guidance,
  • examples of good practice within the industry,
  • examples of effective communications from those running and providing schemes

• Partnership working – TPR will work in partnership with government and other regulatory and industry partners to identify future initiatives and develop good practice guidance
  
  
• Intervention – TPR propose to take action where poor practice is carried out on a significant or systemic basis and has a major impact on member’s benefits. For example, they will be prepared to use their powers by publicly "naming and shaming" where appropriate.

Trustees, employers and pension providers will have to demonstrate that they understand how to run a DC scheme correctly and know what the risks are to members and how to address them.

The results of the consultation should be available shortly; we’ll keep you informed of the outcome.