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Investment governance guidelines for DC pensions
The Investment Governance Group (IGG) has issued a consultation paper on the Investment Governance of DC Pension Schemes. Find out what opportunity this presents to advisers and how we can help you.
Investment governance is a major theme in our industry at the moment. And as the trend towards DC pensions continues it's no surprise that there are moves to make sure these schemes have a strong governance framework.
Consultation paper – Investment Governance of DC Pension Schemes
In February 2010 the Pension Regulator's Investment Governance Group of senior figures in the pensions industry issued a consultation paper on the Investment Governance of Defined Contribution Pension Schemes.
This aims to establish the accepted code of best practice for DC scheme governance and proposes six key principles and accompanying guidelines. The six principles are:
- Clear roles and responsibilities for investment decision making and governance.
- Effective decision making.
- Appropriate investment options.
- Appropriate default strategy.
- Effective performance assessment.
- Clear and relevant communication.
These include best practice guidelines for setting up and reviewing appropriate default strategies and investment options.
Our investment proposition can help with many of the IGG's recommendations:
Appropriate default options
Our award winning Governed Portfolios and lifestyle strategies take account of both risk profile and time to retirement.
Ongoing governance
Our Investment Advisory Committee (IAC) monitors and adjusts our Governed Portfolio asset allocations and all our funds, with an extra layer of governance on our Matrix funds.
Regular communication
The minutes of the IAC meetings are available to paste into reports for members.
Key responsibilities
The best practice principles and guidelines are targeted primarily at trustees and employers and are quite extensive and potentially time consuming. For example the current draft guidelines include recommendations that employers and trustees:
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Ensure the default strategy and investment options accommodate the various risk profiles and time horizons of scheme members
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Consider a substantial list of factors when selecting funds
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Produce and apply guidelines for the selection and removal of funds
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Spend time reviewing and managing the default strategy and investment options
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Communicate effectively with scheme members about their investment options.
An opportunity for you
But the IGG acknowledges that trustees and employers may not have the skills or time to design and manage this type of governance framework so they say that many responsibilities can be delegated to an adviser or provider. This gives you an opportunity to discuss the need for a strong governance framework with the employers and trustees you deal with and the ways that you can help them put such a framework in place. And our investment options can help you build a solution that meets the IGG's standards.
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