New DC Code Of Practice: Requirements For A "Quality" Scheme
The Regulator has laid its draft code of practice on the governance and administration of trust-based DC schemes before Parliament.
United Kingdom
Corporate/Commercial Law
The Regulator has laid its draft code of practice on the
governance and administration of trust-based DC schemes before
Parliament. It is due to come into force in November 2013.
The code is divided into five main sections with each one having
a basic statement of the relevant quality requirement followed by
more detailed guidance.
DC code of practice |
Main quality requirements |
Know your scheme |
- understand their duties and be fit and proper to carry them
out; and
- ensure that sufficient time and resources are identified and
made available for maintaining the ongoing governance of the
scheme.
|
Risk management |
- establish and maintain adequate internal controls which
mitigate significant operational; financial, regulatory and
compliance risks; and
- ensure that sufficient time and resources are identified and
made available for maintaining the ongoing governance of the
scheme.
|
Investment |
- ensure that investment objectives for each investment option
are identified and documented in order for them to be regularly
monitored;
- ensure that the number and risk profile of investment options
offered reflects the needs of the membership;
- ensure that a default strategy is provided which is suitable
for the needs of the membership; and
- act in the best interests of all beneficiaries.
|
Conflicts and advisers |
- be able to effectively demonstrate how they manage conflicts of
interest;
- understand and put arrangements in place to mitigate the impact
to members of business and/or commercial risks;
- establish and maintain procedures and controls to ensure the
effectiveness and performance of the services offered by scheme
advisers and service providers; and
- ensure that accountability and delegated responsibilities for
all elements of running the scheme are identified, documented and
understood by those involved.
|
Administration and contributions |
- ensure that member data across all membership categories is
complete and accurate and is subject to regular data
evaluation;
- support employers in understanding their responsibilities for
providing accurate information, on a timely basis, to scheme
advisers and service providers;
- monitor contributions and deal appropriately with contributions
which have not been paid in accordance with the payment
schedule;
- ensure that core scheme financial transactions are processed
promptly and accurately;
- ensure that administration systems are able to cope with scale
and are underpinned by adequate business and disaster recovery
arrangements;
- understand the levels of financial protection available to
members and carefully consider situations where compensation is not
available; and
- understand and put arrangements in place to mitigate the impact
to members of business and/or commercial risks.
|
The sections of the code on investment and contributions require
trustees to have a high level of understanding of the security of
assets and protections available (including those relating to
platform providers where relevant). They include expectations on
the monitoring of investment performance and on the continued
appropriateness of any particular investment option (including any
default fund) and an understanding of where investments may not be
subject to compensation protection. Trustees should set performance
review triggers but the code does not set down any specific
requirements: "Trustees should set triggers which are
appropriate to the long-term nature of pension scheme investments
and should not take decisions based upon short-term
performance".
The code of practice is not a statement of law but sets out the
standards which the Regulator believes are necessary for trustees
to meet the underlying legal requirements.
The draft code of practice can be found here.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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