Pensions Regulator unveils guidelines on contract-based DC pensions

The Pensions Regulator has published guidelines for employers suggesting how they can become more involved in the governance of contract-based defined contribution (DC) pension schemes, including group personal pension plans.

The Voluntary employer engagement in work place contract-based pensions schemes guidelines suggest employers can become more engaged in their scheme by involving advisers, employer representatives, employees, management committees and trustees in reviewing the management of the scheme. The guidelines also set out the specific functions an employer may like to consider for review.

The Pensions Regulator has put together case studies of employers that have become effectively engaged with their schemes.

Tony Hobman, chief executive of the Pensions Regulator, said: “Many employers have already put in place voluntary governance arrangements as they see them as beneficial for both themselves and members. This guidance is designed to support employers who choose to be involved in the governance of the scheme by identifying options and sharing case studies.”

However, Ashish Kapur, DC product specialist UK at pension fund solution provider SEI, believes that although well intentioned, this guidance “is likely to bring little true benefit” to pension scheme members so that they are able to make effective investment choices.

He said: “One of the recommendations – putting in place great big monitoring committees in contract-based schemes – will give employers a heavy burden.†This is because employers could spend a lot of time and money on advice and monitoring a contract-based scheme, but under the current legislative structure, they cannot communicate meaningfully to their employees or make changes to the default fund where it is shown that the majority of employees are placing their assets.”