Improving outcomes for DC pension savers

The outcome from a defined contribution (DC) pension scheme depends on a number of factors: contributions made to it, the charges applied, investment returns and decisions made when the individual comes to draw their pension. (Under current arrangements, these decisions will typically include whether to buy an annuity, the type of annuity to buy and at which rate).

This note provides an overview of the recent debate on possible measures to ensure all workplace DC schemes are of good quality, offer value for money and are capable of delivering good outcomes. These include: whether a cap should be applied to any charges applied to the scheme; how to improve transparency in relation to charges; how to improve standards of governance and whether to encourage the development of larger schemes able to take advantage of economies of scale. There has also been a debate about whether contribution rates need to increase if individuals are to achieve an ‘adequate’ income in retirement.