Trustees should take more control and rely less on their providers to ensure good governance of their defined contribution (DC) schemes, a consultant has urged.

Muse Advisory said that good DC governance does happen, but it is a "very long way short" of being a universal feature that members can expect.

Ian McQuade, Muse Advisory client director and DC lead, said: "Good governance of trust-based schemes means the trustees have to assume responsibility and this is something that often sits uncomfortably.

"It is easy to put your head in the sand and assume, or perhaps hope, that someone else is taking care of it - which is a dangerous thing for schemes to do. The trustees are the trustees after all, with fiduciary responsibilities stretching further than just financial matters - this is about members' quality of life in the future."

McQuade said that smaller schemes in particular should be reviewing their governance, but this is not happening.

According to a Pensions Fraud risk survey by Baker Tilly, 86% of DC schemes had either never tested their internal controls for fraud, or had not tested them in the last year, due to barriers such as time, knowledge and resources.

McQuade said: "But the trustees of these schemes need to step up to the plate and think carefully about understanding their responsibilities and executing them diligently.

"Their behaviours and decisions today will directly impact, for better or for worse, the quality of their members' lives in retirement. They may need to implement a better governance structure and assume proper responsibility for it.

"Or they might consider other solutions such as getting involved with a mastertrust or setting up a contract based arrangement with one of the relevant providers. Either way, action is urgently needed to protect members' interests and deliver decent outcomes."

First published 09.04.2014

monique_simpson@wilmington.co.uk