A final scary thought for the Chair of a DC scheme

Topic:

Hot topic

Date published:

Friday, 8 January 2016

Author:

Mark Homer

New pension flexibilities increasing cost and complexity

The new DC pension flexibilities introduced in the 2014 Budget have helped keep DC pensions in the headlines by providing greater freedom for members in how they use their pension savings. That’s great, but what about the cost?

The DC Chair needs to assess whether the flexibilities over-ride, or need to be introduced into, the scheme rules. There is a cost for revising the rules. Will members actually take advantage of the flexibility once it is introduced? There are additional costs for administration and the revision of systems to cope with drawdown and the associated tax due. Who should pay these costs? The employer/sponsor, or members?

The DC Chair also needs to be familiar with the new disclosure relating to the new flexibilities. Information that is not provided to the member or is provided outside of the required timescales will lead to concerns/complaints and additional costs.

Scary thought

The new disclosure regulations and flexibilities are complex. Complying with them and making decisions over how to best to respond to the new flexibilities are a challenge that needs a tailored approach scheme by scheme. Understanding the membership dynamic and their likely needs are key.

The DC Chair will need to be on top of this, managing the trustees’ advisers to get best value and support from them and meet the demands of the Pension Regulator to avoid fines and/or scrutiny.

If you'd like to discuss any of the issues raised in our 'scary thought' series, why not come along to our Scary DC Breakfast on 28 January 2016 in London? This event is designed for Chairs and trustees of DC pension schemes, pensions managers, finance directors and other employer representatives responsible for pensions. Register to attend here.

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