Determining the financial strength of a pension provider
The importance of evaluating the comparative financial strength of pension providers is best defined by Defaqto, an independent financial information business:
‘There is little point putting a scheme in place with a provider who is not going to be in business in the foreseeable future. Ascertaining and comparing the financial strength and capability of providers will go some way towards mitigating this risk.’
There are a number of ways to determine strength, ranging from credit ratings to scheme ownership to accreditation, the latter of which is arguably the most widely used barometer.
TPR has recently tightened master trust pension scheme accreditation criteria in an effort to improve good service delivery. Schemes had until March 2019 to apply for authorisation. A number of pension providers exited the market in the wake of these changes, unable to meet the rigorous new standards.
With TPR not due to publish the final list of authorised schemes until autumn 2019 and also announcing that they do not expect all those that applied to gain authorisation, advisers looking to recommend a scheme in the near future must be absolutely certain of the provider’s financial strength and rigour.
Impartial experts Defaqto have produced a guide comparing default funds from over 70 schemes. As well as revealing returns from all the major providers, it offers an overview of the measures to consider when reviewing their financial strength. This essential guide provides a clear and independent way to assess and compare the vast number of schemes available.