DC Governance (January 2009)
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In November 2007 The Pensions Regulator and the FSA jointly published extensive guidance on governance of Group Personal Pensions (GPPs). Since then guidance on “Voluntary Engagement” has been made available. This has lead to the focus on the setting up of DC Governance Committees as it is up to employers to take the initiative in setting up governance standards.

The Governance Committee

A governance committee’s aim is to oversee the governance standards and requirements in order to be compliant with the new guidance.

Committee Members can include:

  • adviser eg IFA, employee benefit consultant
  • employer representative eg HR department / finance
  • employees
  • management committee
  • Trustees of an existing occupational pension scheme

They tend to have the following characteristics:

  • a monitoring and advisory role but no executive function
  • are established by the employer
  • their activities depend on the terms of reference
  • focus on active members still employed by the employer
Benefits of Governance Arrangements
  • increased employer and employee engagement can save time and money by preventing problems that could be costly to put right
  • they can improve member understanding and appreciation of the pension offered
  • they can improve take-up of the scheme
  • they can lead to better quality arrangements

In fact one of the general problems with the provision of DC pension schemes is the low level of involvement by the members

This is apparent when there are low savings amounts and poor understanding of the value of the schemes. Also employees spend minimal time considering the options and are not active in deciding whether the investment decisions match their requirements.

One of the best ways to improve poor involvement is to improve communications and a DC governance committee can be instrumental in helping this to happen.

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