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09

OFT's DC report missed central question for savers, says IFoA

Open-access content Monday 23rd September 2013 — updated 5.13pm, Wednesday 29th April 2020

The Office for Fair Trading’s analysis of the defined contribution pensions market failed to address the central question of what constitutes a ‘good outcome’ for retirement savers, the Institute and Faculty of Actuaries has said

The OFT issued the conclusions of its major market study of DC pensions last week, announcing that it had agreed a set of reforms with government, regulators and industry to ensure DC pensions provide better value.

But responding to the OFT's conclusions, Nick Salter, president elect of the IFoA, said: 'The question this report does not address, and one we believe is an equally valuable question, is that of outcomes and what constitutes a "good outcome". This is ultimately what scheme members desire.'

He said the important factor in terms of a 'good outcome' was the conversion of a pension pot to a retirement income. 

While the IFoA believes there is a limited supply of suitable products available in the market to produce these 'desired outcomes', the institute said it would look for ways of encouraging innovation from product providers to offer appropriate contracts.

Salter said: '[This] should be considered and the IFoA looks forward to working with other bodies to investigate ways in which this could be achieved.'

Yet, IFoA feels the report could be an encouraging sign for individual savers and employees as the watchdog said it would consider whether the workplace pension market is able to offer value for money.

'The report has clearly found that DC workplace pensions' charges are complex and at best opaque. The creation of standardised reporting of charges would address many of these concerns,' said Salter.

'We are pleased to note that the OFT does not believe that cheapest equates to best for pensions and that a charges cap, if introduced, could bring with it a number of unintended consequences that may not be in the best interests of scheme members.'

This article appeared in our September 2013 issue of The Actuary .
Click here to view this issue

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