Out-Law News 2 min. read
11 Jul 2013, 4:25 pm
The new guidance (58-page / 228KB PDF), which is subject to approval by the UK Parliament and Northern Ireland Assembly, is expected to take effect from November, the regulator said. New guides to help employers select a good DC scheme, and to operate a management committee for the governance of a workplace personal pension, will also be published "shortly", it said.
"Getting DC pensions right is central to making automatic enrolment a success and improving retirement incomes for millions of people," said Andrew Warwick-Thompson, executive director for DC governance and administration with the Pensions Regulator.
"Although these are many excellent DC schemes governed in members' best interests, overall standards remain mixed. The code of practice will help meet trustee demands for practical guidance on how they can meet the legislative requirements for running a DC scheme," he said.
The Pensions Regulator published a draft Code of Practice for consultation earlier this year, prompted by the start of the Government's automatic enrolment programme. The Government has estimated that between five and eight million people will begin saving more towards their retirement or saving for the first time under the programme, which began for the largest employers in October last year. The vast majority of those savers will be enrolled into DC schemes, under which the benefits provided on retirement depend on the performance of the saver's investment.
The final version of the guidance takes into account concerns raised in relation to its length, detail and accessibility during the consultation process. It has also been revised to give more clarity to the roles of trustee and employer. Pensions Regulator Codes of Practice are not statements of law: rather, the guidance sets out what trustees need to know in relation to risk management, investment, conflicts of interest and administration in order to comply with their legal responsibilities.
Pensions law expert Simon Tyler of Pinsent Masons, the law firm behind Out-Law.com, said that the new guidance would give trustees of DC occupational schemes "plenty to think about".
"The Code of Practice contains plenty of useful pointers and will, alongside the guidance due to be finalised in the autumn, be essential reading for trustees and their advisers," he said. "The Pensions Regulator has responded well to comments from the pensions industry, toning down the code in certain areas - such as in relation to DC AVCs in defined benefit schemes – and generally allowing more flexibility in the way trustees can comply."
"It has, however, stuck to its guns in relation to master trusts. Independent insurance will still be required for these schemes, despite the additional cost. How onerous this new requirements will be will depend on the continuing discussions between the regulator and the Institute of Chartered Accountants in England and Wales," he said.
A 'master trust' is an occupational trust based pension scheme provided for the benefit of several unconnected employers under a single trust arrangement. These trusts will be expected to obtain independent assurance demonstrating that they comply with the new standards, and to ensure that participating employers receive additional support and clear instructions addressing information requirements. The Code of Practice states that these expectations will apply because such trusts "may have a large number of employers with limited experience of pension scheme administration".
The new guidance will apply to trustees of all occupational DC trust-based pension schemes with two or more members, including additional voluntary contributions (AVCs) under occupational defined benefit (DB) schemes and the DC element of hybrid schemes, which feature a mixture of DC and DB elements. It does not apply to schemes, or elements of hybrid schemes, which provide DB benefits only or to so-called 'contract-based' schemes, such as work-based personal pensions or stakeholder schemes.
