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    VfM preparation – are you ready for your new Value for Members assessment?

    06 December 2021

    Punter Southall Aspire

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    3 minute read

    Your guide to the new Value for Members assessment

    The Pensions Regulator (TPR) is getting rough and tough with its goal of consolidating the Defined Contribution (DC) market and ensuring good member outcomes – are you ready for what comes next?

    With the new DC Value for Member (VfM) assessment requirements impacting all schemes from their first scheme year end after 31 December 2021, Trustees of nearly 2000 trust-based pension schemes in the UK will need to ensure they can demonstrate sufficient value is being provided to their members and, if not, justify why the scheme shouldn’t be wound up and the assets transferred to an alternative DC arrangement, such as a master trust.

    As a Trustee, are you ready for the new assessment?

    Download your 10-step Trustee VFM checklist

    In this blog, Stuart Arnold and David Bouchard share some of their thoughts on how to approach it, as well as some challenges which you may face along the way.

    The new assessment is lengthy and complex, with the Trustees having to assess the value provided to members against three comparator schemes, as well as an absolute assessment of their own value as a Trustee board.

    As part of the process at least one of the comparator schemes must have been engaged with by the Trustees over a potential transfer, which has raised concerns around capacity issues with the providers of master trusts and GPPs, who will see a significant increase in requests for terms. This means it is vital that sufficient lead in time is allowed for to complete the assessment.

    How we can help with the new VFM assessment

    As you can see, the new requirements are much more involved.

    David Bouchard says “There is much greater need for Trustees to not only understand, but also have access to and knowledge of the wider pensions market to support their assessment. Professional advice will be beneficial to many boards in meeting their duty and doing the best for their members”.

    Our specialist Provider Research Group has built up a strong understanding of the market, allowing us to provide a clear rationale and suitable peer group for the three comparator schemes, based on your scheme’s requirements and demographic.

    Stuart Arnold noted that, in addition to understanding the wider market, “Tough introspection will be needed by Trustee boards and potentially their advisers. We don’t yet know how far TPR will go to mark the Trustee’s homework in this area, but demonstrating an open and constructive discussion has been had will certainly be beneficial should the Trustees ever be challenged.”

    Interestingly, effective management of conflicts of interest is one of the Department of Work and Pensions (DWP)’s seven metrics for assessing the governance and oversight of the scheme and how this benefits its members. Although this focuses on ensuring the Trustees are managing their conflicts, it’s also important to consider conflicts of service and consultancy providers.

    At Punter Southall Aspire, we can offer Trustees a completely independent assessment of their scheme and how this compares with the market, as we do not provide any scheme administration or operate any master trusts that could present us with a conflict of interest.

    Following the assessment, our report will highlight whether each area of the scheme is either better than, in line with or behind the comparator schemes and benchmark the good value which is being delivered to members. From this point any areas which require improvement can be discussed, with Trustees deciding how best to proceed in the interest of their members.

    We would also be delighted to support Trustees with the subsequent preparation of the Chair’s statement, scheme return and online disclosures, which must include the outcome of the Value for Member assessment.

    Key challenges

    We have identified several key challenges that trustees will face in completing their VfM assessment.

    To help you tackle them, we have prepared a Value for Members checklist that can be downloaded here:

    Download your 10-step Trustee VFM checklist

    As previously mentioned, there may be capacity issues in the market, with multiple requests for terms, or to consolidate, being sent to an ever-shrinking list of providers.

    For the first time, there is also the requirement for net investment performance to be obtained and compared with the three comparator schemes. This may present a challenge in the delivery of these figures, with this being the first year they are required to be reported by Trustees.

    It is essential that Trustees don’t shy away from answering the tough questions, a vital part of the assessment, with the DWP stating that if any of the seven areas aren’t delivering sufficient value, serious consideration should be given to winding up the scheme.

    All of these make it crucial that sufficient lead in time is allowed for, ensuring an accurate and timely assessment can be provided.

    If you’d like to talk to our expert team about our Value for Members assessment, please get in touch.

    Related resource

    Your 10-step Trustee checklist
    Download checklist

    At Punter Southall Aspire, we can offer Trustees a completely independent assessment of their scheme and how this compares with the market.

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