The DWP has published a response to last year’s consultation on ‘Investment Innovation and Future Consolidation’, which includes a further consultation and draft legislation planned to take effect from 5 October 2021. The proposals affect DC occupational schemes and are designed to improve outcomes for members, specifically of smaller DC schemes which cannot demonstrate good value. These schemes will be required to wind up and consolidate. Smaller schemes (now defined as those with less than £100 million in assets) will have to complete an updated value for members assessment, comparing the scheme to three larger arrangements, one of which would be expected to accept the smaller scheme’s members upon wind-up. The trustees will have to report to the Regulator the outcome of the assessment and any action that they are taking as a result.

The Government believes that DC consolidation is the best way to ensure that members receive both good value and good governance from their scheme and benefit from economies of scale.

All DC schemes will be required to report on net investment returns for their default and self-select funds in their Chair’s statement.

Other items included in the consultation cover easements when assessing the default charge cap to accommodate performance-related fees and to facilitate investment in illiquid assets.