The Investment Governance Group (IGG) (a Government-sponsored body chaired by the Pensions Regulator established, essentially, to promote the revised Myners principles) has published a consultation paper: Investment governance of defined contribution pension schemes. This "best practice guidance" is aimed at employers, trustees, providers and advisers in relation to work-based defined contribution arrangements (both occupational and personal).
The consultation paper consists of six high-level principles, each accompanied by best practice guidance. It also includes a "table of accountabilities" identifying the key decision-maker (either the employer or trustees) in relation to the main stages involved in the establishment and operation of defined contribution schemes.
The IGG sets out six principles intended to be "the accepted code of best practice for those responsible for investment decision-making and governance" in defined contribution schemes:
- Clear roles and responsibilities for investment decision-making and governance.
- Effective decision-making, through the adoption of a proactive approach (by, for example, building in regular assessment and reviews of the people and processes within the decision-making structure).
- Appropriate investment options. Broadly, decision-makers should offer an adequate range of investment options in light of the expected risk tolerances, investment time horizons and member requirements; and ensure that they have clear investment objectives and relevant benchmarks.
- Decision-makers should offer an appropriate default strategy.
- Decision-makers should monitor the performance of investment options and take appropriate action where necessary (for example, consider removing an option which is not performing well).
- Clear and relevant communication to members so that they can make an informed choice as to investment funds and understand their personal responsibility for their pension plan, the choices they have available and how these affect the value of their fund and retirement income.
The consultation runs until 5 May 2010.