Category: DC Solutions

DC Governance: a checklist

Is your scheme following best practice?

Ultimately, if advisers and service providers are not performing as expected, we believe trustees or sponsoring employers should push them to improve the situation as quickly as possible or replace them.

DC governance should focus on appropriate due diligence to ensure your scheme has the best chance of delivering optimal outcomes for members. But that’s not to say it’s all about processes. Sound governance includes anything that involves taking practical steps to reduce the risk of DC scheme members suffering adverse outcomes. At the heart of all good DC scheme governance lies a
clear understanding of your objectives. Whether you are the sponsoring employer or a trustee, what does success look like for you? And what can you do to help ensure you achieve it?

In this paper we focus on four governance factors that we believe are instrumental in helping to deliver your DC scheme objectives:

  • Following the DC code – Are you taking due notice of the guiding principles provided by the regulator? Does the trustee board have the necessary skills and experience to run the scheme effectively?
  • What’s your investment strategy? – Are as many members as possible going into the investment strategy that’s right for them? Is your default arrangement reviewed regularly?
  • Adviser and service providers – Are you evaluating effectively whether your advisers and service providers are helping you to meet your objectives?
  • Governance resources – Do you have the governance time, budget and skillset to help you achieve your objectives?

The Regulator's DC Code

What should you expect?

The direction of travel from the pensions regulator is clear: higher expectations for trustees and scheme managers are on the way. This is to help support members in meeting the challenges of increased flexibility and complexity of decision-making in a post-Freedom and Choice world. The recent high levels of transfers out of DB schemes are posing further risks to members from poorly governed at-retirement solutions.

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