There are new regulations coming into force on 6 April 2015 (subject to Parliamentary approval), which will cover the responsibilities of the chair of trustees who, from the same date, will be required to be appointed by the trustees of all pension schemes which provide money purchase benefits (subject to a three month transitional period).
The new regulations are part of the government’s attempt to impose new minimum standards on all such schemes. The name of the chair will be required to be registered and this information will be provided to the Pensions Regulator (“tPR”). This information is to be updated whenever a new chair is appointed.
The chair of trustees will have certain responsibilities, the principle of which is undoubtedly the need to provide an annual statement in which it will establish that he scheme has met the minimum governance standards (in terms of administration charges, value to money for members and transaction costs incurred while managing investments).
The first statement will need to cover the period from 6 April 2015 and must be produced within seven months of the scheme’s year end. For some schemes, this will mean that a period of less than three months is covered by the statement, in which case it can be rolled over and those surplus months added to the subsequent year’s statement.
The statement must be included in the scheme’s annual report and must:
- Provide a statement of investment principles for the default investment plan, detailing any review undertaking and the performance of the default plan after said review
- Confirm whether financial transactions relating to members of the scheme have been processed correctly and within a reasonable time
- State the range and the levels of charges and transaction costs applicable to: a) the scheme’s default investment plan and; b) all funds invested relating to members which are outside of the default plan
- Detail any information relating to transaction costs which the trustees have not gathered and state what steps are being taken to gather said information
- Explain the trustees’ assessment of the extent to which the charges and transaction costs are of good value for members
- Emphasise the importance of trustees’ continued knowledge and understanding by explaining how the requirements for trustee knowledge and understanding have been met throughout the scheme year
Failure to comply with the above requirements could lead to a fine being levied by tPR of between £500 and £2,000.