Understanding value for members assessments
Find out about value for member assessments, and how we can help you with them.
How value for members assessments affect your business
If you run your own in-house defined contribution (DC) pension scheme with your own set of trustees, value for member assessments could apply to your business if the scheme has:
- assets of less than £100m
- been operating for at least three years.
If your pension scheme is with us, our independent Trustee carries out the value for members assessment, so you don’t need to do anything.
What you need to know about value for members assessments
If your pension scheme meets the criteria above, your trustees must check whether the scheme is giving good value to its members. This is called a value for members assessment, and it is a key part of the trustee’s job.
The Pension’s Regulator (TPR) believes this assessment is very important. If trustees don’t do it properly, they may not be able to identify and address areas where a scheme is underperforming. This could mean members don’t get good value for money.
DC Trustees resposibilities
Trustees of defined contribution (DC) pension schemes that meet the criteria must:
- Carry out a value for members assessment every year
- Include their findings in their annual chair’s statement
- Compare their scheme with three similar schemes to check they’re offering the best possible value to members
- Review three main areas such as costs and charges, net investment and investment performance (after fees), and how well the scheme is run (governance and administration)
Trustees may also be personally liable for fines, and could face further action from the regulator.
If trustees don’t complete a value for members assessment, members could lose out.
What does a value for members assessment involve?
As part of the assessment trustees must check whether:
- Core financial transactions are processed quickly and accurately
- Records are accurate and up to date
- The default investment strategy is appropriate for members
- Investments are properly overseen
- Trustees have the knowledge and skills needed to run the scheme effectively
- Communication with scheme members is clear and effective
- Any conflicts of interest are properly managed
For more detailed guidance about value for members assessments, please refer to information from The Pensions Regulator and the Department for Work and Pensions.
What if the assessment shows poor value?
If an assessment shows members aren’t getting good value for money, trustees must take action to address it.
If the scheme cannot be improved and cannot offer good value, this could mean closing the scheme and moving members’ assts to a different one. If this happens, trustees should have spoken to at least one of the three comparison schemes about the possibility of transferring members.