Ready for the DC governance challenge?
If you or your clients' companies have a defined contribution (DC) trust-based pension scheme, you should ask yourself the following questions:
- Is there a strategy in place in relation to the new pension freedoms that came into effect in April this year?
- Will the trustees be able to demonstrate that they have complied with the Pension Regulator's 31 'DC quality features' of a well governed scheme?
- Has the Regulator been told the identity of the Chair of the trustees? There is a deadline of 5th July to do this.
- If the scheme is being used for auto enrolment purposes, does the default fund comply with the new limits on charging?
Many occupational DC schemes were set up when there were no alternatives other than defined benefit. Governance was generally minimal at best - provided that the contributions were paid on time the trustees tended not to give the scheme too much attention. Since April 6th this year, trustees are expected to be far more proactive in ensuring that the scheme is properly governed and that the outcome for members is as good as it can be.
There are three possible reactions to this new climate:
- Either the trustees and employers will ignore the problem and carry on as before;
- companies will opt to wind up the scheme and replace it with a group personal pension plan or a mastertrust;
- or they will rise to the challenge and up their game.
If they take the first option - with is likely to be the default position - then they can expect attention at some point from the Regulator. Selection of either of the other two options is therefore unavoidable. Input from a governance specialist can be invaluable here - especially if the scheme is to be wound up - but also if any of the existing trustees are reluctant to put their neck on the block as Chair.
Contact Nick Boyes at Able-Governance if you would like to explore ways that we can help you or your clients meet this challenge.