The Pensions Regulator has issued a statement setting out guidelines for the good governance of DC occupational pension schemes. It is aimed at trustees of DC schemes with more than 12 members, as well as qualifying schemes set up for auto-enrolment. A further statement is to be issued later in the year for trustees of hybrid schemes.
Key points include:
- expectations of DC scheme trustees: trustees must understand how their scheme operates and should not underestimate the different steps required to manage underlying risks properly;
- TKU: any DC-specific knowledge gaps must be managed promptly;
- conflicts of interest: trustees must be able to demonstrate that they can act impartially without their decisions being tainted by actual or perceived conflicts, and they should have a conflicts of interest policy;
- charging structures must be applied fairly to all categories of membership;
- investment: trustees must assess the appropriateness of the default fund and ensure that it complies with the DWP default fund guidance;
- asset protection: in the absence of a financial guarantee, trustees must establish what compensation arrangements are available if an investment provider defaults; understand levels of protection under the Financial Services Compensation Scheme; and carefully consider situations where compensation is not available;
- administration: trustees must devote sufficient time to manage their scheme, including meeting regularly to discuss governance issues, e.g. at least quarterly.
The appendix to the statement sets out a comparison chart of some key differences between the steps and activities required for the good governance of DB and DC schemes.
Click here for the Pensions Regulator’s statement, “The role of trustees in DC schemes”