The Pensions Administration Standards Association has updated its defined contribution guidance to account for the “ever-changing” complexities in the sector.
The first DC governance guide was published four years ago, but PASA noted that “a lot has changed since then, with more in the pipeline”.
Eighty-five per cent of active pension savers are in DC schemes, while assets under management have increased 30 per cent in a year, and more than 430 per cent since 2012.
Auto-enrolment has expanded access to DC, but PASA observed that many employers and pension schemes do not have “a team dedicated to pensions”, making its guidance essential for “all parties in the administration process”.
The guidance stressed the importance of “clear, useful and informative administration reporting”, as well as “the importance of data, how it’s used and why it’s so vital”, while also setting out pointers for dashboard requirements. It acknowledges, though, that “this area will necessitate further updates”.
The guidance also includes a section on chair’s statements on the grounds that “governance has to be demonstrated”, and it sets out the Pensions Regulator’s expectations “alongside a section on internal controls”.
PASA acknowledged, however, that “nothing stands still in DC pensions”, and said it would “keep an eye on TPR’s intention to consolidate its DC codes later this year”.
Finally, the guidance includes information on “small pots activity” that is “in the pipeline” in its section on decumulation.
Though the guidance sets out the minimum standards that must be met to ensure processes are “compliant”, as well as pointers on how to upgrade these to “good”, it also noted that “the fundamental benchmark for compliance is not limited to regulatory compliance”.
Rather, it is “the minimum required to protect pension savers’ to a level [independent governance committees], trustees, employers and savers would naturally expect”.
PASA’s DC Working Group chair Lesley Carline said: “Good DC administration isn’t the sole responsibility of the administration provider. Oversight and governance is at three levels — the administration provider, the employer, and either trustees or IGCs.
“This guidance provides a useful resource on what’s expected from all parties in the administration process, specific to their pension arrangement type. It focuses on six key areas — data, transitions, decumulation, reporting, controls and procedures, and the chair’s statement — which is an entirely new addition to this version of the guidance.
“The next 18 months will see further changes in the DC pensions industry. We will continue to refresh this document as details are confirmed,” she added.
Benjamin Mercer is a senior reporter at Pensions Expert, FTAdviser's sister publication
