DC governance is a complex and wide-ranging area, which has evolved rapidly in recent years.
The combined forces of the DC flexible access changes and evolving regulatory requirements on governance including the requirement to publish a Chair’s Statement on specific areas in the scheme’s annual report, have made DC governance standards an increasingly urgent issue. The Pensions Regulator’s DC Code and six ‘How To’ guides set out its current expectations and suggested best practice in relation to the governance of schemes offering DC benefits – the Regulator will also shortly consult on a new, consolidated Code of Practice which will cover a number of governance requirements. This page provides further resources to help with specific aspects of DC governance.
Preparing for your Chair’s Statement
Publishing a Chair’s Statement is an annual requirement, but producing that statement is a year-round task. It is impossible for the trustee board of any registered pension scheme providing DC benefits to properly fulfil the duty to provide a Chair’s Statement unless there are processes in place throughout the year to gather evidence to support the statements contained in it.
The Chair’s Statement must cover five specific areas – governance of the default arrangement; the processing of core financial transactions; charges and transaction costs; value for members; and trustee knowledge and understanding. However, the 2016 DC Code and accompanying guidance add a significant layer of expectations and suggested best practice. Bringing all the different strands together can be tricky, and it can be challenging for trustees to provide a ‘meaningful narrative’ on all these issues in a reasonably concise statement within their annual report.
Our quick guide to preparing for the Chair’s Statement will help you meet these requirements – it sets out the information to be included together with suggested actions for gathering evidence. With the Pensions Regulator issuing regular fines for non-compliance, you may also be interested in our companion guide, Producing the Chair’s Statement: what can go wrong.
Investment governance: the implementation statement
Regulations introduced over the last few years require most schemes to update their statements of investment principles and to publish these online. In addition, schemes are now preparing to write and then publish their implementation statements, setting out how the SIP, or specific policies within it, have been followed in practice. Read our briefing The implementation statement: how to prepare for it, which sets out a list of questions to help you get started.
More changes ahead
The government is currently consulting on a number of changes to DC governance and reporting requirements, aimed at improving outcomes for DC members. Smaller relevant schemes (with assets of less than £100 million) are being targeted with specific obligations designed to encourage (or force) under-performing schemes to consolidate and wind up. Other changes affecting schemes more widely include updated requirements for the annual Chair’s Statement (including related disclosure obligations); additional scheme return reporting obligations; and clarifications relating to the calculation and reporting of costs and charges.
Read more about the proposed changes.