Time restraints are the major impediment to good defined contribution (DC) governance, a survey by the Pensions Management Institute (PMI) has revealed.

According to the survey, 76% of PMI members said that finding sufficient time and resource was the principal obstacle to effective scheme governance for DC plans, and 79% felt that regular reviews of the scheme and its providers were needed.

PMI revealed the results of its member survey in response to the Department for Work and Pensions' (DWP) call for evidence on quality standards in workplace DC schemes.

Speaking on behalf of the PMI External Committee Nigel Aston of SSgA said: "Solving the default investment puzzle that lies at the heart of every DC plan is central to how the industry collectively meets the DC challenge.

"Robust and effective governance can help schemes to pragmatically solve the trade-offs between risk, reward and cost that need to be considered for all default solutions."

The survey also revealed that 77% of the 175 responses from PMI's members saw a lack of commitment from the governance team itself as problematic and 63% cited a lack of technical expertise as being damaging.

A total of 66% of the respondents felt that effective leadership was essential, and independent advice was valued by 72% of the members surveyed.

PMI said that it may be the case that governance excellence, and the time to implement it, trumps absolute independence, as 49% of the respondents felt that conflicts of interest were a problem and 53% stated that effective governance necessitated independence from the sponsoring employer itself.

More transparency surrounding default fund charges was also regarded as important by PMI members as 75% agreed that this was more important than the quantum of fees.

PMI chief executive Vince Linnane said: "DC will be the bedrock of retirement provision in the UK, with millions of employees and employers coming to pensions for the first time. This will necessitate a renewed vigour in how the industry meets the challenge of effectively and fairly governing these plans.

"The PMI believes it can play a full role in this regard, welcomes the DWP call for evidence and thanks its membership for its forthright and helpful perspective."

First published 24.09.2013

monique_simpson@wilmington.co.uk