Things to scare the chair of a DC scheme: number 2

Topic:

Hot topic

Date published:

Friday, 4 December 2015

Author:

Simon Riviere

DC is not DB: members are relying on trustees

The unfortunate reality is that, for many defined contribution (DC) schemes, the chair of trustees is often more familiar with defined benefit (DB) than DC arrangements. Despite being with us for decades, DC is still often regarded as ‘a brave new world’ or the poor relation. Historically, DC has been relegated to the end of the trustee meeting agenda. Too often time runs out and the DC scheme or section is not given the consideration it deserves.

This is perhaps an understandable mindset as DB schemes have been around far longer and many employers and trustees will still be dealing with closed or legacy DB arrangements with big deficits that involve scary numbers. That doesn’t help DC members one bit though. After all, unlike DB members, their benefits will be directly affected by the pot of money that sits in their scheme at the point they retire. Very few DC members have the knowledge or enthusiasm needed to properly manage their own pension pot – they are relying on the trustees to apply their experience and understanding to ensure their pension scheme is managed properly.

It is solely up to the trustee Chair to ensure discussions regarding DC matters are given a higher priority. Placing them further up the meeting agenda so they are considered at an earlier stage in the meeting when energy levels are higher is a good start. Ensuring your trustee board has the right knowledge and understanding to properly assess DC issues is vital. This may require regular trustee training and, for some, adding independent expertise to the board may prove invaluable.

Scary thought

Not making the time to properly consider the governance of your DC scheme may be costly. Finding the time to properly consider DC governance is not easy either, nor is finding the time to undertake the required amount of training.

Trustee Chairs must take the lead and show proper diligence towards the governance of their DC scheme. They must also be unafraid to recognise when appropriate skills on the trustee board are lacking.

This 'scary thought' series will run up to our Scary DC Breakfast in January 2016. This roundtable is designed for DC scheme chairs or trustees, pension managers, finance directors and other employer representatives. Register to attend here.

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