Working in partnership
25th August, 2020
The governance of a defined contribution pension scheme is a partnership of many stakeholders.
The trustee has a specific role. To fulfil the role, the trustee needs to be knowledgeable with relevant skills to ensure the scheme is run well, with good decisions being made and members’ interests protected.
The trustee will work with employers, advisers and other stakeholders whilst dealing with the challenges of conflict of interest that can affect their decision making.
Administration and record keeping
Good administration is the bedrock of a well-run scheme. The scheme administrator, whichever way the arrangement is set up, needs to have the right people and processes in place to ensure members’ benefits are administered to a high standard.
This means that once the employee is a member, they become subject to the monthly contribution cycle. If a member has a salary change, becomes part time or leaves it is important the right contributions are received and paid over to the member’s pot. An effective administration system operated by capable administrators will ensure robust processes that collect the correct data, have procedures in place to monitor evaluate and control the risks.
At the most basic level, it is simply good practice to try to understand pension scheme members’ views and needs.
Building on this, a clear communication plan is essential to help members understand and value their benefits. The plan will help attract, motivate and engage members, using clear and accurate language that members can understand and act on where necessary. The best communication is one that remembers the audience and so tailors the message to their needs. Sometimes, multiple versions of the same communication are needed with each one tailored to the specific needs of different subsets of the pension scheme membership.
Another important consideration is to communicate with members at the right time and in the right way to help them make good decisions.
The above sits on top of statutory requirements such as preparation of a chair’s statement and regular reporting.
The scheme must have appropriate investment governance arrangements, involving the right advisers, and the right investment strategies put in place to provide the best chance for scheme members to get adequate income.
Value for money
There is a legal obligation to assess value for money and understand the elements that contribute to the value members receive from the scheme.
By building a robust governance structure around the scheme that takes account of the areas listed above, the trustee can develop a partnership with the various stakeholders to help ensure that scheme members can have the best opportunity for good outcomes.