On value for members:
“At the moment, assessment of value for members will be mostly qualitative and it’s probably fair to say this won’t be perfect in its first year. One of the reasons is a lack of industry-wide data. How to achieve cross-industry benchmarking is something we’re looking at.
“The regulator has called on large schemes to use information sharing through their consultants and professional trustees as one way of assessing value.
"As part of good governance, we already actively review value on behalf of our clients on a regular basis. Our overall scale and our strong relationships with providers help to positively influence the outcomes. So we would naturally expect our client base to have more competitive fees than comparable schemes who don't regularly test the market.
“Schemes that don't have the same level of governance and adviser support and influence will inevitably struggle to achieve the same value for money on fees. Wider industry comparisons should emerge. These are critical if value is to be assessed effectively.”
On fiduciary for DC:
“When you hand over the keys of your DC pension scheme to a fiduciary manager, you’re ceding a significant amount of control on the way your members’ assets will be invested.
“In the guide to investment governance that accompanies the new DC Code, the Regulator says “the skills that a successful investment consultant needs are not exactly the same as those that a successful fiduciary manager needs.”
“TPR also warns trustees about the potential for conflicts of interest in choosing a fiduciary manager and recommends they agree very clear terms of reference. It also cautions them to ensure they carry out enough due diligence to be comfortable with the degree of delegation involved.
“I suspect TPR is keen to head off similar issues in the DC world to those which we have seen in DB. Here many trustees have simply appointed their existing consultant as the fiduciary manager to the scheme, without considering what’s available in the wider marketplace. And in some ways, trustees are no different from members here. In the same way that members often go with their existing provider for their annuity or drawdown product, trustees may be tempted to go with existing consultants without considering what is available in the market more widely. It was quite telling in the DB world that those schemes with an independent trustee on board were much more likely to test the wider market than those boards without one.
“Trustees need to think very carefully about who they hand the keys to and how they will monitor whether their fiduciary manager is in fact delivering the best possible outcomes for their members. Clarity of accountability is vital here, as is a clear assessment framework against which to judge the “value for members” being delivered by the fiduciary manager.”
On AVCs:
“One area that hasn’t gained much attention to date is how to assess value for members in AVC arrangements. Many won’t be aware that with profits funds are captured by the Code. Where there are money purchase benefits in a DB scheme, some of those running the schemes probably don’t realise they have to produce a Chair’s Statement, for example.”
Commenting on the statement of communication principles, Sarah Hollingworth, communications consultant at Like Minds says: ““We welcome the Statement of Communication principles published in the Code. It’s important to get members engaged on the right things. To ensure there’s value for members it’s equally important to have measures of success in place for communications.
“The starting point for any effective engagement strategy is a clear and concise statement of what you’re trying to achieve. We would recommend capturing communication objectives, goals, strategies and measures within a Member Engagement Statement. A Member Engagement Statement is a useful governance tool which allows a Trustee group to demonstrate that their overall engagement strategy is aligned with the requirements of the DC code and is being measured against it.
“The measures within this document should be specific to the goals and strategies that have been agreed and they should also be realistic and achievable. As set out in the code, you may implement a strategy to ensure that your communication material is accurate, clear, relevant and in Plain English. Having your documents scored for readability, gives you a tangible measure to work with. Being able to improve upon this readability score is just one simple way of measuring the success of that specific strategy.”
|
