Under The Pension Regulator's new code of practice for DC schemes, there is a greater responsibility on DC pension trustees to ensure compliance with the governance standards. But looking beyond just these standards, what are trustees' responsibilities for improving member outcomes and supporting that members are fully engaged with their DC pension, both when saving towards retirement and when making that crucial decision at retirement?
Arguably, the whole point of the trustee role is focused on member outcomes and so their role should encompass not only meeting the governance standards, but also member engagement. After all, a beautifully run scheme, compliant to within an inch of its life, will only deliver the outcome to members if members are engaged and use it.
We know and bodies of research show us that the vast majority of DC members are ill-equipped to fully understand the power of their own decision making when saving into a DC pension and when taking those pension benefits. This is particularly applicable to members who have also experienced a DB pension with the same employer; they feel the employer will make the decisions for them and will ensure they are well looked after.
DC pensions are a different ball game; members can choose their contribution level, their fund investment, their date of retirement/ date when to access their pension benefits, how to take those pension benefits and who their nominated beneficiary should be. There are a lot of decisions and some of them require quite sophisticated budgeting, pensions, financial planning and tax knowledge.
DC members now need a lot more education, guidance and advice than ever before and if trustees made this one of their key points of focus alongside compliance with their governance standards, then members of the future will surely be in a much better place.
What should employers expect from today’s pension trustee board? By Tynan Barton, 27th February 2017, 2:05 pm Need to know: Trustees of defined contribution (DC) pension schemes have been placed under the spotlight, leading to a greater focus on governance. Trustees will be under more pressure from employers to ensure that the objectives of a pension scheme are being met. Trustees have long been used as a mechanism for delivering good-quality pensions that protect employees’ benefits; but in 2016, in part as a result of the advent of auto-enrolment and the need to make defined contribution (DC) pension schemes far more efficient, the standards expected of DC trustees have been raised and the role has become more challenging.