Articles - What do the new DC Code requirements mean for your scheme

For scheme years ending on or after 6 April 2018, trustees of defined contribution (DC) schemes will need to meet new governance requirements. Since 6 April 2015, trustees of trust-based pension schemes providing DC benefits have been required to prepare a mandatory annual governance statement, called the ‘Chair’s Statement’. This must be signed by the chair of trustees and included in the scheme’s annual report and accounts.

 By Ken Anderson, Senior Consultant - Head of DC Solutions, XPS Pensions Group

 Trustees must then confirm on their annual scheme return to the Pensions Regulator (TPR) whether the Chair’s Statement has been produced. Trustees who fail to produce a Chair’s Statement within seven months of each scheme year end face an automatic mandatory fine of between £500 and £2,000 from TPR.

 The new regulations which came into force on 6 April 2018 extend the content of the Chair’s Statement by requiring additional information on charges and transaction costs to be included and for this information to be made available free of charge on a publicly-accessible website.

 TPR’s DC Code, which underlines their expectations of scheme trustees and the standards that need to be met to comply with legislation, requires trustees to assess the value received by members during the scheme year and the influence this could have on future outcomes. Currently there is a significant amount of regulatory and media focus on the fact that many members are not being effectively supported to make the right decisions when it comes to accessing benefits.

 The new requirements apply to all those DC trust-based schemes which have been required to prepare mandatory Chair’s Statement’s since 6 April 2015. Schemes where the only DC benefits are additional voluntary contributions (AVCs) are exempted.

 Although it has always been necessary for the Chair’s Statement to include some information on charges and transaction costs, for scheme years ending on or after 6 April 2018 trustees must provide:
 • The charges and transaction costs for each default arrangement and each alternative fund option in which any member was invested during the scheme year; and
 • A ‘pound and pence’ illustration of the cumulative effect of those charges and costs on a typical member’s pensions savings.

 Once the new requirements apply, trustees must publish the parts of the Chair’s Statement relating to the default arrangement and the level of costs and transaction charges, free of charge on a publicly-available website. Trustees must signpost members to the information via their annual benefit statements and will be required to provide a hard copy of the information if it would be unreasonable for the person requesting it to access it online.

 Although the regulations took effect on 6 April 2018, the ultimate deadline for trustees to provide the new information is seven months from the end of the first scheme year ending on or after this date. This means that the first schemes to be affected, those with scheme years ending on 6 April 2018, must comply by 6 November 2018. However, many trustees are seeking to adopt the new requirements now on a ‘best practice’ approach or simply in order to avoid any delays at the scheme year end.

 From 6 April 2019, trustees must tell scheme members via their annual benefit statements that they can request additional information about their investments in pooled funds. If a member does request more information, trustees must respond within two months to provide them with the name and international securities identification number (ISIN) of the funds in which they are invested.

 To help trustees comply with the new requirements, in June 2018 TPR updated its ‘quick guide’ to the Chair’s Statement. The guide is designed to be read in conjunction with its DC Code and has been revised to reflect the new legislative requirements which came into force on 6 April 2018. TPR points out that a ‘poor’ statement is much more likely to be non-compliant and therefore result in the trustees being personally liable for a fine.

 So, what are the next steps to understand what the new requirements mean for your scheme?

 1. Consider whether your scheme has kept pace with developments, such as freedom and choice
 2. Consider whether your scheme offers value for members
 3. Consider what changes will need to be made to your benefit statements, member website and other communications
 4. Devise an effective strategy and implement it.

 It is important to remember that this is not just a ‘tick box’ exercise, TPR expects good quality statements from scheme trustees.


Back to Index

Similar News to this Story

New strategic options for DB pension schemes
The next phase of Mansion House reforms is upon us! On 23rd February the government published a consultation on proposals that will open up two new st
Five Hundred Twenty Five Thousand Extra In Interest
The aim of raising interest rates is to slow down the economy, by reducing demand and making financing more expensive. This makes sense as a mechanism
Next steps with the General Code
Whether you have already completed initial assessments or are starting the work now, this webinar from Barnett Waddingham will take you through the ne

Site Search

Exact   Any  

Latest Actuarial Jobs

Actuarial Login

 Jobseeker    Client
Reminder Logon

APA Sponsors

Actuarial Jobs & News Feeds

Jobs RSS News RSS


Be the first to contribute to our definitive actuarial reference forum. Built by actuaries for actuaries.