Larger defined contribution pension schemes are significantly more likely to display the features needed to deliver the best retirement outcomes for savers than smaller schemes, according to research published by The Pensions Regulator today.
Three-quarters of schemes with 1,000 or more members included in a survey carried out by the regulator were found to display at least 15 of the 21 quality features it has identified as necessary for good outcomes. These relate to areas including investment, governance standards, value for money and communications to members.
This compares to just over half (51%) of medium schemes - those with between 100 and 999 members - and under a fifth (18%) of small schemes.
Bill Galvin, chief executive of The Pensions Regulator, said: 'This research supports our view that schemes benefiting from economies of scale are more likely to display the features of good governance and to provide value for money.
'In addition, the research makes it clear that many existing small and medium-sized schemes fall well short in the quality features we regard as necessary for good outcomes.'
Galvin noted that the provision of high-quality, value for money schemes with engaged trustees protecting members' interests was particularly important with the introduction of pensions auto-enrolment, which began last October.
In particular, the research found that, while 70% of large schemes monitor the suitability of the default used for members at least annually, this was the case for only 61% of medium-sized schemes and 39% of small schemes.
While over half (53%) of schemes in total had procedures in place to monitor the performance of advisers and service providers and review their performance at least every three years, only 46% of small schemes did so - compared to 78% of large schemes.
Disparities were also found in relation to value for money, with 51% of large scheme trustees expressing confidence that they charges incurred by members represent value for money, compared to just 19% of small schemes.
The results of the survey will inform the consultation the regulator plans to publish later this month on how its regulatory approach can improve DC pension provision and support the government's Reinvigorating workplace pensions strategy, published last year. The consultation will set out the standards it expects of all trust-based schemes and will include a code of practice and supporting guidance for the governance and administration of trust-based schemes.
'Our communications to employers will encourage them to choose schemes that can demonstrate they are compliant with our principles,' Galvin added.