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Webinar for DC trustees

DC, governance and administration

Darran Burton, head of DC regulation

Phil Spary, policy lead - accountant6 March 2013

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Key components of our DC regulatory approach

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Enforcement: monitoring, investigating, putting things right

Our enforcement approach

consists of three activities:

1. Monitoring Gathering information to help us identify and monitor risks of non-compliance with legal requirements

2. Investigating Assessing whether what we find is a potential breach of the law and requires further action

3. Putting things right Measures we can use to resolve problems we have identified.

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Work-based personal pensions

Work-based personal pensions

Large, employer-sponsored trust-based schemes

Large, employer-sponsored trust-based schemes

Master TrustsMaster Trusts

Micro trust-based schemesMicro trust-based schemes

DC landscapeDC landscape

Consistency with the six DC principles and DC quality features,strengthened through ‘Comply or Explain’ and independent voluntaryassurance andtested through thematic reviews

Consistency with the six DC principles and DC quality features,strengthened through ‘Comply or Explain’ and independent voluntaryassurance andtested through thematic reviews

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Small and medium trust-based schemes

Our segmentation of the market

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DC code structure

• Reference document split into five broad sections

• DC quality features determine the content in each area and set them in the context of their legal framework

• Who does the DC Code apply to?

• Relationship with other codes of practice

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DC code: key messages Know your scheme

• Professional trustees must have higher level of knowledge

• All trustees must have comprehensive DC-specific knowledge and maintain it

• All trustees need to complete trustee toolkit or equivalent within 6 months of appointment and professional trustees should have PMI or equivalent

• All trustees must be fit and proper

Risk management

• Trustees must embed risk management procedures for DC and identify, evaluate, monitor and manage key DC risks

• Trustees must operate adequate internal controls around risk management

Investment • Trustees should set an appropriate investment strategy and monitor performance (including charges)

• All DC schemes – not just AE schemes – should have a default fund

• Trustees should seek to invest predominantly in FSA regulated assets with FSCS protection

• Trustees should undertake additional due diligence and risk analysis for other investments

Governance of conflicts of interest and advisers/service providers

• Trustees must understand and develop procedures to address the implications of actual, potential and perceived conflicts

• Master trusts can pose particular problems to which trustees must be alert

• Trustees must monitor adviser/service provider performance (including addressing business failure or disaster recovery risk)

Administration • Accurate record-keeping for DC is crucial

• Core scheme financial transactions must be accurate, timely and complete

• Trustees must understand basis of any outsourcing and ensure integrity of admin platforms and business continuity arrangements

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DC guidance: key messages

Investment • Communications should remind members to review their investment choices

Governance • Trustees should carry out value for money reviews

• Trustees should know the costs and charges of the scheme

• Action should be taken where value for money not present

• All costs and charges should be disclosed to members and employers

• Schemes should offer flexible contribution structures

Administration • Trustees should support members in getting a good deal at retirement

• Providing access to advice/annuity broking service should be considered

• Schemes should promote the Open Market Option (OMO) and enhanced annuities

• Trustees should review how retirement processes are working

Member communications

• Trustees should create accurate, clear, engaging communications

• Trustees should read their own scheme communications annually to consider whether they are fit for purpose