With nearly 45,000 UK employers now confirming they have auto-enrolled staff into their workplace pension scheme, millions of employees are now relying on their workplace defined contribution (DC) scheme as their main source of retirement income. To help UK employers support their employees’ retirement goals, Buck Consultants has launched a new governance service which will also ensure companies’ auto-enrolment schemes meet the principles set out by The Pensions Regulator.
“Employees rely on their employer to make decisions that will lead to a comfortable retirement,” said Sue Pemberton, head of DC and Wealth, Buck Consultants at Xerox. “Management is essential. It’s not just a matter of setting up a programme and forgetting about it – if a scheme is to deliver good outcomes for members, it needs to be reviewed on a regular basis.”
Buck’s new service starts by setting out the objectives of the pension scheme committee. It looks at how better outcomes for members can be achieved, how this can be measured – for example should it be an income replacement ratio or average contribution rate – and how progress can be monitored against objectives.
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According to Buck, there are some basic checks that will ensure the scheme is operating effectively:
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Payments are made and invested on time
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Records are kept up-to-date and accurate
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The provider should be fit-for-purpose, with a competitive charging structure and accurate administration services
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The default investment strategy is suitable for the demographics of the membership
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Member communication is accurate, clear and engaging
“As with most reform, the devil is in the details,” Pemberton said. “In the early stages of having an enrolled workforce, many employers are still working out what their priorities are for their members.”
A review of the DC governance will allow them to review their objectives, make changes to their investment strategy, record keeping, payments structure or member communications, to produce the most efficient scheme, in terms of cost and administration, as well as manage risk.
“Good pension governance is fundamental to the success of all workplace pension schemes – it doesn’t just happen by accident,” she said. “Constant measurement and assessment, together with focused communications and engagement, can materially impact members’ outcomes, potentially improving their prospects at retirement.”
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