A Flexible Scheme will not work if the foundations are not sturdy…
17th February, 2015
With the industry clambering to get ready for DC flexibility changes from April 2015, there seems to be very little industry buzz surrounding DC governance. I should define ‘industry buzz’: obviously the Regulator and DWP have been very vocal on the subject, the problem is this is not generating the level of adviser briefings and industry media content that DC flexibility has found.
The changes to DC governance, which build upon the Code of Practice 13 (“the Code”), come into full effect from April 2015, but finding updates on this appears difficult. Indeed, having typed “DC Governance Updates” into Google I found nothing of recent relevance and was mainly referred to the tPR website. The Regulator guidance is excellent for pensions professionals, but I do wonder if this is where lay Trustees go to find information on upcoming issues. I would have expected to see or hear a lot more in adviser content, presentations and through the pension press. When you type “DC Flexibility” into Google, it may crash your browser!
The principles of DC Governance are hugely important and work very well in tandem with DC Flexibility. What is the point of getting access to your pot, when there is next to nothing in it? The Code was designed to ensure members receive the appropriate information and to ensure providers remain fit for purpose. The framework should safeguard against members dealing with legacy platforms and having bad pension experiences which will shape their future pension engagement. Without protecting members in the growth phase through well managed Schemes there seems little point in creating unique products to take into account flexibility in the settlement phase.
With April 2015 meeting invites beginning to circulate it is imperative that DC Governance requirements are highlighted as a key item. I would suspect the overhaul required to comply with the Code is long overdue for a large majority of DC arrangements. Therefore, the review should be taken as a positive and not a tick box exercise to ensure compliance. This is further emphasised with the February DWP Command Paper which further strengthens the official push towards value for money, well governed DC workplace pension schemes. This also provides backing to certain aspects of the Code and Guidance in concrete legislation.
The DC market is in the middle of a huge growth phase brought around by the movement from DB and the captive market provided by auto enrolment. Whilst auto enrolment, DC Flexibility and DC Governance arriving in close proximity may not have been a direct initiative, it is difficult to argue that the three complement each other well. With auto enrolment providing the members and DC Flexibility providing widespread buzz, it is left to DC Governance to manage the products and to provide the framework for best practice. If applied correctly the concept of a legacy platform should be eradicated as Trustees work towards good workplace pension schemes.