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Poor DC governance hitting confidence

Industry experts say a lack of good governance risks undermining employee confidence in defined-contribution pension schemes.

Speaking at TheCityUK’s pension conference in London last week, Financial Services Consumer Panel chair Kay Blair said that governance levels in defined-contribution schemes continue to lag behind those in defined-benefit schemes.

She said: “I think governance in defined-benefit schemes has been good but governance in defined-contribution schemes is not as good.

“Employees would have more confidence in pensions in general if there was more effective governance in DC schemes.”

National Association of Pension funds chief executive Joanne Segars said DC super trusts with independent trustee boards could help plug the governance deficit.
She said: “The UK market is filled with small DC schemes and small schemes tend to have weak governance.

“In DC, a lot of pension schemes have no clear governance whatsoever. That is a worrying place to be with automatic enrolment just months away.”

The Pensions Regulator chief executive Bill Galvin said that there is a lack of understanding and engagement among trustees of some existing DC schemes.

He said: “In some trust-based, employer-sponsored pension schemes the trustees demonstrate a lack of understanding and engagement with DC issues, particularly if it is a hybrid scheme with a DB element. There is a challenge for us to make sure the people running pension schemes have the right levels of knowledge, understanding and engagement to do a proper job in looking after the members’ interests.”

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  1. There is an easy answer to the poor governance prevalent in small OPS DC. They should switch to contract-based schemes where governance is exemplary as a result of TCF, or switch to master trust where the trustees are professional and capable of governing the scheme properly.

    We already have Super Trusts in the UK – we call insurance companies. No need to invent something new – we already have scale providers of administration.

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