With more and more focus shifting toward DC schemes, trustees must be ready.

From 6 April 2015, trustees of defined contribution (DC) schemes need to meet new requirements on governance standards, charge controls (subject to certain exceptions) and communication about pension flexibilities.

The changes to these regulations have made DC governance an increasingly urgent issue.

DC schemes must have appointed a chair to sign a mandatory annual statement, which should show how they comply with the quality features that were set by The Pension Regulator (TPR) in 2013.

The chair of trustees is to write their, possibly first, annual statement explaining how governance standards are being met.

So what are the governance standards?

The new governance standards require the trustee board to explain in detail how the following key elements are being met:

Explain how you possess, or have access to, sufficient knowledge and understanding to run the pension scheme effectively. Governing standards cover trustees knowledge and undertsandin,g the requirement for trustee knowledge and understanding has been in place for many years, but now you need to describe and explain how the requirements have been met every year in your chair's statement.

Ensure that core scheme financial transactions are processed promptly and accurately

Meet new requirements for the scheme's default investment arrangements

Consider whether the costs and charges borne by members represent good value. Trustees or the employer may decide that scheme members will be better served by:

-Requiring improved service levels.

-Negotiating lower costs but not running the risk of lowering standards to seek lower costs. Better value for money doesn't always mean the cheapest, trustees must not assume the focus on cheapest is best.

-Best service, is this service better for some members than others? If so, then why? A different service provider be more beneficial to memembers. Make sure services are being used, and if not then why continue to provide them.

Meet additional standards if you run a relevant multi-employer scheme (eg master trusts).

Source - The Pensions Regulator

First published 24.03.2016

ceri.pugh@wilmingtonplc.com