DC trustees beware (and DB trustees as well if they hold DC funds)!
The Pensions Regulator has issued a new 37 page long Code of Practice for all schemes offering money purchase benefits. It also applies to DC Additional Voluntary Contribution monies within DB schemes and hybrid schemes that have both DB and DC sections. The Code confirms the Regulator’s expectation of the standard that DC trustees need to comply with in relation to their schemes.
The code has six main sections:
- The Trustee Board – The focus is on protecting member interests, having the right people on the Board with a strong Chair of trustees. The latter point receives some specific guidance with regard to the skills the Chair of trustees should possess.
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Scheme Management Skills – The Regulator emphasising its previous position focuses on good member outcomes, ensuring trustees have sufficient knowledge and understanding to be able to manage risk and work with advisers and employers and deal with conflicts of interest.
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The Regulator focuses on core financial transactions ensuring that the right people and processes are in place so that member benefits are administered to a high standard.
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Investment Governance – Again the focus is on good member outcomes, monitoring and reviewing investment strategies and fund performance and setting good objectives and strategies to achieve good outcomes for members.
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Value for Money – The Regulator re-emphasises the new obligations to assess value for money and that trustees need to understand what elements within their schemes contribute to the value that members get from that scheme. These can be wider than just costs and charges.
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Communicating and Reporting – Essentially making sure the trustees understand what pension scheme members want and need from their scheme and that pension scheme members will understand what the scheme can do and deliver for them, thereby helping them to make good decisions.
The Regulator’s code is supported by six guides giving more detail on how trustees can meet each of these standards. There is also a new online tool to allow trustees to assess their scheme against the standards in the code. Adherence to the code is of particular importance for DC scheme trustees given the high profile fines recently issued by the Regulator in ensuring that the Chairman’s statement is delivered on time.
If you have a DC scheme and are struggling with any of these points especially in relation to the composition of the trustee Board, our independent trustee company, Queen Street Trustees Limited can assist in this regard. Its directors are all practising solicitors. Alternatively, if the increasing amount of legislation around the DC area is causing you to contemplate entering a master trust and/or winding up your existing trust based DC scheme, or the DC section of a scheme or transferring out the AVCs from a DB scheme, our lawyers have experience on the pertinent issues relevant to both areas and would be happy to help you.
For further details of these services, please contact us 0113 220 6213 or your usual member of the pensions team.
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September 2016
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