Small DC Schemes & Climate Change: Are you ready? 

Is your scheme ready for the climate Challenge?

The Pensions Regulator (TPR) has issued a clear statement: if your small defined contribution (DC) pension scheme is not taking the appropriate action to protect savers’ retirements from climate risk. As trustees you should consider the messaging in this statement, which indicates there are too many small DC Schemes where trustees’ knowledge of the scale of financial risks posed by climate change is limited. 

TPR is calling on you to act in the best interests of your savers and do one of two things: upskill on climate risk matters or exit the market and consolidate. 

TPR’s statement highlights how vital strong investment governance is to protecting and enhancing saver outcomes. As a trustees, in line with their fiduciary duties, you should consider material financial risks arising from climate change and nature loss when making long-term investment decisions and to put structures in place on how these risks can be mitigated. If you’re not in a position to meet TPR’s expectations on protecting savers, you should ask yourself if consolidating into a larger scheme would be in savers’ best interests.

How Dalriada.DCC can help you? 

To support you in this, Dalriada has created an affordable ‘off the shelf’ consolidation model called
‘Dalriada.Defined Contribution Consolidator’ (DCC) which includes a highly competitive member charge, irrespective scheme’s asset size. By grouping small defined contribution pensions schemes together, the DCC model delivers efficiencies and economies of scale. 

By transferring to the DCC to consolidate small defined pension schemes  you can relieve yourself of the growing pressures around investment strategy in relation to climate risk as well as compliance and governance burdens relating to Pensions Dashboard and the Value for Money Framework (VfM). The Government’s supervision and direct engagement on how Trustees of smaller DC schemes are managing these risks is only likely to grow. In 2024 TPR issued £100,000 in fines to 19 small DC schemes for governance breaches and failing to offer members good value for money. 

Through DCC, your members benefit from a significantly lower annual charge, which is inclusive of transaction costs, with assets invested in a quality default investment fund, incorporating ESG investing (Environmental, Social, Governance). This directly tackles issues such as climate risk and sustainability, thereby meeting the compliance requirements set out by TPR, with options for self-selection and decumulation included, providing flexibility for members at different stages of their pension journey.  

Your members will also benefit from improved engagement with the solution offering on-line functionality, a dedicated helpline, reduced response times for member queries, and improved communications – all designed to deliver a more positive and informed pension experience.

Want to learn more? 

Further reading on TPR’s expectations of Trustees, as well as Dalriada’s DCC solution can be found here: