Helen Ball, Head of DC and Partner at Sackers, commented: “The role of trustee is tricky and requires a sharp eye and attention to detail. To ensure a smooth service over the next 12 months, DC scheme trustees should ensure they target five key areas:
Chair’s Annual Statement - As the highlight of the “governance calendar”, this is the document upon which reputations will be won or lost. Its importance has recently been elevated with The Pensions Regulator starting to take a firmer line, issuing new guidance on what it expects to see, with penalties up to £2,000 being issued against trustees whose statements are found wanting in detail.
Investment Reviews - Given the requirement to review investment strategy at least every three years, sticking with the same old investment options isn’t the best way forward. There is surely more to come on this over the next few months and it is crucial to keep up to date with any developments to ensure members are offered good value for the investment costs they are paying.
Guidance and Retirement Options - Trustees could at some point be asked to show what they are doing to help their members make appropriate choices (such as warnings about the risks of drawdown). With concern being expressed about scams and members “cashing in” too early, it has never been more important that members receive appropriate guidance and support when they make retirement decisions. Whether the buck stops with the employer or the trustee remains to be seen, but caution is urged to avoid any pitfalls such as mis-selling.
Costs and charges/transparency - Investment providers are now required to disclose information around transaction costs to trustees and IGCs who, in turn, will be required to share this with members. The aim is to create a market where members demand such information, so that they appreciate the true cost of what they are paying for. Trustees will have to gain a better understanding of the kinds of transaction costs that they face and how these are paid for.
Master trusts - Over the next 12 months, the need to obtain “authorised master trust” status from The Pensions Regulator (TPR) will begin in earnest. The authorisation regime is due to start with effect from autumn 2018 and, in the meantime, there will be ongoing consultations on draft regulations and a TPR code of practice. Employers and trustees who deal with master trusts, for example on auto-enrolment or transfers, should check the master trust’s plans to become authorised in due course. ”
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