DC Governance and the Regulator's Code of Practice
The Regulator's Code of Practice Number 13 came into effect last month. The code sets out the legal requirements and standards of governance and administration that trustees of occupational defined contribution (DC) trust-based schemes need to attain.
It focuses on a number of quality features which are related to existing legal requirements applicable to DC schemes including:
- Trustee knowledge and understanding
- Internal controls
- Governance of conflicts of interest and advisers/service providers; and
The Code is underpinned by a new compliance and enforcement policy which will apply to trust based DC schemes. The Pensions Regulator is clearly taking a closer look on enforcement action and how DC schemes are being run in practice. Trustees of DC Scheme should familiarise themselves with the new Code and put in place procedures which are appropriate to a DC Scheme to ensure compliance. Areas that trustees should consider include:
- The appropriateness of any default investment strategy
- Whether the scheme continues to provide value for money for members
- Any differences in the charging structure as between active and deferred members
- The quality of scheme administration and levels of reporting
- Record keeping
- Whether the trustees themselves have the resources and skills to do the job in hand.