"My fear is that a wounded Regulator is a dangerous thing," says Premier's John Reeve as the Regulator recently revealed it failed in its target of improving the management of DC arrangements.

All eyes in the pensions industry are now on defined contribution (DC) arrangements. Auto-enrolment is in full swing and the vast majority of members entering pensions for the first time through this route are joining some form of DC arrangement. In addition, the revolutionary changes announced in the 2014 Budget have put DC pensions into the public domain like never before.

Given this it is not surprising that The Pensions Regulator (TPR) has put considerable effort into how DC arrangements are to be managed in the future. Its six Principles and 31 Quality Features have been designed with an eye to the increasing importance of DC in the pensions market.

Interestingly in its annual report for 2013-14 recently published the Regulator notes that it has failed to meet three of the four Key Performance Indicators (KPIs) relating to improved management of DC arrangements which it set at the start of the year.

- Only 12% of employers were aware of the six Principles (against a target of 60%)

- Only 61% of DC arrangements had at least four-fifths of the Quality Features in place (target of 75%)

- Only 37% of trustees understood the charging structure of their arrangements (the target was a rather disappointing 42%)

My fear is that a wounded Regulator is a dangerous thing! It is likely that it will now redouble its efforts to regulate DC arrangements more closely. It would not be unusual for this to have the opposite effect to that intended.

The six Principles and 31 Quality Features are rather like "motherhood and apple pie"; it is very difficult to criticise them and they are things that do need to be addressed. It is great that trustees have been given these extra responsibilities since they are the people in the best position to improve member outcomes. However, trustee time is limited and my fear is that trustees react against the increased Regulator scrutiny by focusing more on proving that they have met the published requirements than on improving member outcomes.

Indeed the Regulator's own response to the failure of trustees to understand the charges says: "By... 2018 we aim to ensure that a very high proportion of members are enrolled in a scheme where trustees have a good understanding of scheme charges."

An "understanding of scheme charges" can be achieved easily and the KPI will be met but it takes a more caring and considerate trustee to take action to ensure that charges are appropriate and offer value for money to the member.

So what is the alternative?

I would suggest that we need to move from a world where "compliance with the rules" is replaced by "improving outcomes". Trustees should be encouraged to look at what members really need and what is in the best interests of their members rather than jumping through predefined hoops. The Regulator's Principles and Quality Features are an excellent checklist but they do not, in themselves, improve outcomes. Income in retirement will only be improved if trustees have the freedom and support to do the right thing for their members not by forcing them to "tick boxes".

Written by John Reeve, senior consultant, Premier

John.reeve@premiercompanies.co.uk