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Pension scheme governance - employers' obligations

Employers may assume that any governance obligations are dealt with by the trustees of their occupational pension scheme. Or that they are protected by the providers of their group personal pension plan (GPPP), who are required to have an independent governance committee (IGC).  

This approach is not enough to ensure that reputational risk is protected and that your employees value the contributions that you make into your pension scheme.  

There has been an increased focus on the governance of trust based defined contribution pension schemes in recent years, including new legislation this year requiring a default fund for auto enrolment to meet a 0.75% cap on charges and for fees to represent fair value for members. 

If you offer a GPPP for auto enrolment, your input is more than the choice of provider and ensuring that you comply with your automatic enrolment obligations. Taking a more active role in your scheme could lead to engagement with your employees and less chance of a Pensions Ombudsman case in the future.  

What can you do? 

Trust based schemes:

  • Ensure that your scheme trustees are aware of and implementing procedures to ensure that your scheme meets the standards expected by the Pensions Regulator and set out in legislation. 
  • Liaise closely over scheme communications to ensure that your employees are getting information on their pension that is right for them. 
  • Work together with the trustees to ensure that charges and fees represent fair value for members 
  • Review the default investment options to ensure that they remain suitable for the scheme membership. 
  • Confirm that where your scheme is being used as a qualifying scheme for automatic enrolment the charges for the default arrangements are not in excess of the new statutory maximum. 
  • Ensure that you have systems in place for providing accurate information, on a timely basis, to the trustees and their advisers.
  • Be proactive and collaborative with your trustees, ensuring that communications about retirement options and charges are clear and understandable. 

What will the result be?

These steps will help achieve good member outcomes on retirement for your employees. They should also increase employees' confidence that your workplace pension schemes will deliver a reasonable retirement income.

GPPP

You should establish a management governance committee to meet regularly and review the way that your pension scheme is run. An IGC will not review suitability specifically for your employees, and to be effective feedback from employees of the scheme is needed.

What will the result be?

This should help to drive efficiencies, trouble shoot issues much earlier in the process and help you deal promptly and knowledgeably with member complaints. 
In turn it will reduce reputational risk and achieve greater workforce engagement by asking for feedback on the pension scheme.

How we can help

We can:

  • provide training to you on the new DC requirements and your role as an employer;
  • advise on negotiations with trustees;
  • assist in setting up a management committee;
  • draft terms of reference for the management committee; and
  • review your scheme for legislative compliance.

If you would like information on any of the above please contact governance specialists Sasha Butterworth on +44 (0)333 006 0228 or sasha.butterworth@TLTsolicitors.com or Lizzie Stone on +44 (0)333 006 0479 or lizzie.stone@TLTsolicitors.com.

This publication is intended for general guidance and represents our understanding of the relevant law and practice as at October 2015. Specific advice should be sought for specific cases. For more information see our terms & conditions on www.TLTsolicitors.com

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