VIDEO: Jonathan Lipkin: Take DC governance seriously

Governance in defined contribution (DC) pension schemes is going to move to the top of employers’ agendas as auto-enrolment accelerates, said Jonathan Lipkin, director of public policy at the Investment Management Association (IMA), during an interview with Debbie Lovewell, deputy editor at Employee Benefits at the Employee Benefits Pensions and Workplace Savings Summit on 1 February.

“There will be millions of individuals who are going to be enrolled into DC schemes who are not going to want to exercise an investment choice,” he added. “They will be defaulted into a scheme and they will be defaulted into an investment strategy.

“That places a very high responsibility on decision makers. Whatever the structure you use to deliver DC, you are going to have to be thinking very carefully about governance.”

Lipkin also said that default strategies are not designed for individuals, but for groups of employees, and this should be communicated to them.

“A real default strategy is your best attempt at providing something for a group of employees that have not decided themselves to exercise their investment choice,” he said. “There is a lot that you can do to ensure that that investment strategy is going to work well for employees.

“But we need to be clear with people that this is not designed for an individual [and that] it is designed at a group level to try as best as possible to meet the needs of those who are not able, or are not willing, to make an active investment choice.”