Tuesday, 17 July 2012

Growth of contract DC pensions over trust based schemes is extremely worrying, says TUC

The latest Pension Trends statistics, published today (Tuesday) by the Office for National Statistics, show that the number of people saving in a contract based defined contribution (DC) pension scheme through their workplace has overtaken the number saving in a trust based DC scheme this year.
The figures show that 8.8 per cent of the private sector workforce are now in a contract based DC pension - up from 8.6 per cent last year - while 8.7 per cent are now in a trust based scheme, a fall of 0.2 per cent in a year.
Commenting on the figures, Midlands TUC Regional Secretary Rob Johnston said:
"Few will be surprised at the decline of defined benefit pensions, but the growth of contract DC at the expense of trust based DC should not be over-looked. 
"Of course some contract based schemes offer good value and some trust based schemes are not as well run as they should be, but this trend is extremely worrying.
"In a trust based scheme trustees have a single duty - to look after the interests of all scheme members both active and deferred. A contract based scheme in contrast is normally provided by a company seeking to make a return to its shareholders.
"While market forces can often be relied on to keep costs down, decades of experience show that markets don't function when it comes to pension provision - especially as it is not even the consumer that buys a workplace pension, but their employer.
"With the introduction of auto-enrolment bringing a huge increase in DC pension saving over the next few years, we need to ask hard questions about how we can deliver good governance, low charges and sophisticated investment strategies."

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