When commentators look back over the forever changing tapestry which is UK pension provision, it seems clear that 2015 will be viewed as a watershed year for the trust-based DC pension scheme.
So why is this? Let’s remind ourselves of the run up to the ‘perfect storm’ which now encircles these much loved (they number over 30,000) pension vehicles:
- In November 2013, the Pensions Regulator (TPR) issued its DC Code of Practice and Regulatory Guidance. Throughout this year, schemes will need to show how they fare against 31 Quality Features and, where there are gaps, how they intend to remedy this.
- During the last six months, scheme sponsors and trustees have had to consider their response to Pension Freedom Day. Which (if any) new retirement options should the scheme facilitate? Irrespective of the answer, how should the scheme’s Default Investment Option be amended to cater for scheme members’ needs?
- Finally, scheme trustees need to get to grips with the new legal requirements (from April) around minimum governance standards and (possibly) the charge cap.
When, many years ago, the Employer established the scheme, things were significantly simpler. Together, the above represents unprecedented high speed change – change which even the most experienced lay trustee may well find overwhelming. For example, trustees will be required to consider the extent to which their scheme offers ‘value for money’ and will soon find themselves knee deep in a forensic examination of investment transaction costs – both areas that have usually had little (if any) air time up until now.
And this change will now drive scheme sponsors to make a strategic decision: for the largest schemes (perhaps 1,000 members plus) employers will seek help to strengthen the existing trustee board. For smaller schemes, some sponsors will seek similar help, whilst others might consider wind-up and transfer to either a Master Trust or Group Personal Pension.
Enter Stage Left the DC Professional Trustee (PT). There may not (currently) be a legal requirement for ‘own trust’ DC schemes to appoint a PT – but, given the foregoing, why wouldn’t you?:
- For continuing schemes, the PT will bring a wealth of experience to assist / guide the existing trustees through the current best practice / legislative demands with a clear focus on improving member outcomes
- For schemes looking to wind up, a PT can join the existing governance body and Project Manage the exercise to a successful conclusion.
It’s taken a while and it’s taken fundamental change to make it happen – but DC Professional Trustees are probably heading into ‘buy now whilst stocks last’ territory.
The game has changed for good. It’s our time.