Mercer welcomes the Pension Regulator’s (tPR) additional draft material on its six principles for good design and governance of defined contribution (DC) pension schemes. However it warns that, particularly for the many employers that will be new to pension saving under auto-enrolment, some of the key features are aspirational and employers are likely to need time and support to fully appreciate their governance responsibilities. The firm also highlighted the need for further consolidation of the existing amount of DC guidance and principles that have been issued by various other bodies to avoid adding further layers of work on already stretched trustees and providers.
Mr Paul Macro, UK Head of DC in Mercer's retirement business, said: “It’s a positive step to have this guidance issued in a single document. However without proper support many employers are unlikely to be able to act on it, which in turn makes it difficult for the schemes they use to implement it fully. We look forward to getting some clarity on this from the outcome of tPR’s consultation on its regulatory approach to DC later this year.
“Although sensible, and with a much needed focus on retirement outcomes, the principles risk becoming just another compliance burden. To avoid confusion and added work for those running pension schemes trying to comply with all the DC guidance out there, we urge tPR to work with the DWP, NAPF and IGG to consider consolidating existing frameworks.”
TPR’s announcement contained a list of the draft features that represent its current view of the core components of a DC scheme that are most likely to provide a better income for savers at retirement. Each of the features sits beneath one of tPR’s six principles for the good design and governance of DC pension provision, which were first published last year.
In reference to principle six on communications to members, Mercer fully supports the need to focus on these being ‘understandable’ and ‘engaging’, but warns that this is a stretching objective. On the point about disclosing all charges borne by members on an annual basis Mr Macro commented: “We agree that this is important information for members, but only a minority of schemes do this at present. A lot of work would need to be done to identify and define all charges, and to ensure these are presented in a way that would be useful to members.”
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