Employers should treat trust- and contract-based defined contribution (DC) pension schemes with the same care and attention.
Speaking at the Employee Benefits Pensions and Workplace Savings Summit 2012 on 8 March, a well-known pensions manager said this is important because the average person will often be unable to distinguish between the two types of scheme. They said: “Contract-based schemes need to be governed to the same standard as trust-based schemes.”
Employers should, therefore, establish a governance team for contract-based pension schemes. While there is no legal requirement for employers to do so, the pensions manager added: “There is no legal requirement for an employer to provide tea and coffee at work, but it is a good thing to do.”
They explained that a governance team should not be an executive body or a negotiating forum between employees and the organisation, but instead should be co-operative and productive. When implementing a governance committee, defining its terms of reference and objectives is vital.
Employers operating DC pension schemes should also actively manage investment options to ensure members are offered sufficient choice and a suitable core range should they wish to make their own selection. Looking at the default fund available and keeping up to date with new products coming on to the market should also be a key consideration.
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