code of practice 13/ dc regulatory guidance. agenda background code of practice 13 v. dc regulatory...
TRANSCRIPT
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Code of Practice 13/ DC Regulatory Guidance
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Agenda
Background
Code of Practice 13 v. DC Regulatory Guidance
DC Focus areas
Action: Timeline
2
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Private and Confidential3
• Consultant & Client
Manager
• Spence & Partners
Limited
• Founding representative
on DC Governance
Committee
• Experienced in historic
and recent Trust based DC
pension reviews
Chris Roberts
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Introduction
Confidential: internal use only 4
Background
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Auto Enrolment: the starting gun (and we haven’t finished yet!)
Plethora of Consultations / guidance notes
Particular TPR concern around smaller schemes governance
2010 - Investment Governance Group: 6 DC investment principles
‘Good Member Outcomes’
Significant increase expected in DC scheme members placing Trustees under spotlight
DC modules added to Trustee Toolkit
Background
Private and confidential
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Code of Practice 13 v. DC Regulatory Guidance
Private and confidential 6
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Code of Practice 13 v. DC Regulatory Guidance
Private and confidential
Both
Effective 21.11.13
Applicable to Trustees of:• DC schemes, including those
with DB underpin• DC sections within DB trust• AVC arrangements
Help deliver Good Member Outcomes
Code of Practice
Draws on TKU / Internal Controls CoPs
23 Quality Features across 5 core governance areas
Quality Features: linked to pension legislation
Structure: legal requirements / practical guidance
No penalty for non-compliance, but...
Regulatory Guidance
Read in conjunction with CoP 13 - greater DC focus
9 Quality Features across 4 core governance areas (2 from CoP)
Quality Features: those reflecting ‘good practice’
Structure: best practice guidance / occasional reference
to legal requirements
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DC focus areas
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Private and Confidential
• Investment (CoP/RG)
• Governance (RG)
• Administration (CoP/ RG)
• Member communications (RG)
DC focus areas
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Private and Confidential
(i) ‘Set investment objectives; default strategy’
• Identify / document each fund’s investment objective
• Fund options and default meet needs of actives and deferreds
• Review investment objectives for each fund options
Investment (CoP 12 OF; RG1 QF; 70 paragraphs
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Private and Confidential
(ii) ‘security / liquidity of scheme assets’
• Assets traded on regulated markets
• Understand financial protections for members (e.g. FSCS)
• Mitigate impact of business / commercial risks on members
Investment (Contd.)
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Private and Confidential
(iii) ‘monitor / review default strategy and fund performance’
• Performance / ongoing suitability
• Agree triggers for review
• New DC investment products
• Changing membership profiles
• Changing regulatory requirements
Investment (Contd.)
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Private and Confidential
(iv) ‘communication with members’
• Regular communication re. member’s investment strategy and
implications
Investment (Contd.)
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Private and Confidential
Governance
(i) ‘ensure members receive value for money’ (VFM)
• 4 Step VFM review:
• Collect information (benefits and costs of membership)
• Criteria for assessing VFM
• Compare criteria with other schemes
• Evaluate and act
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Private and Confidential
Governance (contd.)
(ii) ‘transparency of costs and charges’
• Clearly disclosed to members
• Clearly disclosed to employer at point of product selection
(iii) ‘contribution levels’
• Offer flexible contribution structures
• Advise members of impact of contribution level on pension
pot/ ability to pay more, etc.
• Monitor efficiency of contribution amendment process
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Private and Confidential
Administration
(i) ‘Focus on internal controls given particular risks in DC schemes’
• Provision of SMPI
• Review lifestyling mechanics
• Review contributions and investments
• Maintenance of Payment Schedule
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Private and Confidential
Administration (contd.)
(ii) ‘establish robust retirement process’
• Help members optimise income at retirement
• Options clearly communicated so as to support member in
selecting most appropriate option
• Any insurer drafted communications to be compliant with ABI
Code of Conduct on retirement choices
• Information regarding appointment of advisor / annuity broker
• 5 Stage Retirement Process suggested
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Private and Confidential
Member communications
• Improve retirement outcomes through communications which are:
• Accurate
• Clear
• Understandable
• Engaging
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Actions: timeline
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Actions: timeline
Private and confidential
Now
• Plan in place to deliver governance statement y/e after 31.12.14
Autumn 2014• Secondary
legislation confirms new quality / charges measures – awareness of potential further compliance actions required
During 2015• Governance
statement to be published
April 2015• New
governance standards go live
• Qualifying Scheme default fund 0.75% charge cap (so AVC arrangements not affected)
??
• CoP / RG to be updated
2017
• Charge cap review