Following regulatory changes1 that came into force on 6 April 2015, trustees are now required to calculate the charges and transaction costs borne by scheme members and assess the extent to which these charges and costs represent good value for members. The outcome of this assessment must be explained in a new Chair’s annual governance statement.
Currently there is no statutory definition of what constitutes good value, and there is limited regulatory guidance available. The Association’s report Assessing good value for members in your scheme aims to assist trustees in undertaking this assessment, offering a 6 step plan and a guide to best practice in this evolving area.
Amy Hennessy, Policy Adviser, Pensions and Lifetime Savings Association, said: “With the deadline for the first Chair’s Statements fast approaching, trustees are beginning to turn their minds to completing their value for members’ assessment.
“The Pensions and Lifetime Savings Association’s new guide offers trustees practical guidance on approaching the assessment and sets out best practice in this evolving area. Our six-step plan takes trustees from setting out their approach to benchmarking, taking remedial action and recording and reporting.
“Assessing value for members is not a tick box exercise. Neither is it a static one. Trustees are committed to ensuring members get the best retirement outcomes possible and will use this assessment as part of their ongoing efforts to review, revise and improve their scheme to ensure it continues to deliver for members.”
Mark Latimour, Head of Pensions Investment at law firm Eversheds LLP, commented: “The question of what constitutes good value and how trustees should assess this under their scheme is prompting much debate within the pensions industry. Similar questions are also being debated in the context of the new independent governance committees, which have been established to scrutinise the value for money of workplace personal pension schemes. This guide explores these issues and looks to help trustee boards as they decide how to assess and report on the value delivered by their scheme.”
“As the Regulator’s draft new DC Code of Practice recognises assessing whether a scheme represents good value for members is not an exact science and it will inevitably involve an element of subjective judgment on the part of trustees. However, this makes it even more crucial that trustees can demonstrate that they have followed a thorough and robust process, considered all relevant factors and that they are in a position to justify the outcome of their assessment. This guide is designed to help trustees do just that.”
The guide, which was developed in association with Eversheds, can be downloaded below
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