The current defined contribution (DC) landscape is fragmented and more needs to be done to raise standards, the National Association of Pension Funds (NAPF) has said to the Government.

In response to the Government's call for evidence into quality standards in workplace DC schemes, the NAPF warned that there is a growing governance gap, with schemes increasingly being used for auto-enrolment without good governance.

Instead, the organisation said that there should be fewer, larger and well-governed schemes and argued that members of larger schemes are likely to benefit from economies of scale.

Darren Philp, NAPF director of policy, said: "With millions of people being auto-enrolled into DC pensions over the next few years, it is essential that pension schemes are capable of getting good results for savers. We are pleased that the Government is considering minimum standards for DC pensions.

"Securing good outcomes for pension savers requires strong governance. More needs to be done to raise standards of governance across the piece and ensure there is always someone effectively and independently representing the member."

Philp said that more can be done to ensure that trustees have the time and resources to properly consider their DC schemes.

He said: "There is an inherent governance vacuum in contract-based schemes but the situation is not unmanageable – there are many excellent contract-based schemes where the employer steps up and takes responsibility for governance. It makes sense that governance sits at employer-level in these schemes.

"The emerging mastertrusts should prove to be good auto-enrolment solutions for those employers not used to dealing with pensions, but we need to ensure that they meet minimum standards, deliver value for their members, and have strong independent governance."

The NAPF has welcomed the Government's call for evidence on the quality standards in the DC market, but said that the Government needs to "revisit" a couple of its proposals, for instance whether it is feasible to give commercial providers a trustee-style fiduciary duty.

Philp added: "The NAPF has been leading the way in raising standards in DC pensions, particularly through the Pension Quality Mark. It is good to see strong and widespread interest in quality so the Government should ensure its work is well aligned with the PQM and the Pensions Regulator's DC Code of Practice."

First published 09.09.2013

monique_simpson@wilmington.co.uk