The pensions industry has broadly welcomed the Investment Governance Group's (IGG) guidance on investment governance of defined contribution (DC) pension schemes, which closes to consultation today, but some are concerned about how its principles could be applied to contract-based DC schemes.

Financial consultant Mercer questions whether the guidance, which builds on the Myners principles and covers all types of workplace DC pension arrangements, might be applied in practice to these schemes. The guidance carries six proposals, covering accountability and delegation, fund choices and default strategy, and communications with members.

Decision-makers within DC schemes are the targets for the IGG principles, but when it comes to contract-based pensions, Mercer says it is not recognised that the service provider predominantly fulfils this role, not the employer.

"Although we strongly support the Myners principles and welcome the additional spotlight that the IGG principles put on the governance of DC schemes, we fell they will have limited impact for members of contract-based schemes," commented Rachel Brougham, Mercer's head of governance consulting.

"The principles will encourage best practice for trust-based schemes, whereas contract-based arrangements will continue to rely on providers' goodwill and ability to make their products more flexible. Bringing contract-based schemes up to the same governance standards as trust-based pensions would require potentially impractical changes to pensions legislation or providers taking on higher costs to deliver more bespoke workplace products."

Meanwhile, Sacker & Partners LLP believes that the legal position of employers must be considered. Andrew Bradshaw, partner at the specialist pensions law firm, explained: "Whilst we support the IGG's attempts to close the governance gap between trust-based and contract-based defined contribution schemes, care needs to be taken to ensure that the guidance adequately reflects the legal position of employers who provide their employees with access to contract-based schemes. If the intention is to raise the bar with regard to employers' legal duties then, without corresponding 'safe harbour' protections akin to those in place for trustees, we may well see a reluctance to offer contract-based pension schemes and a flight to NEST."

And Standard Life is concerned that the principles are overly biased towards large and trust-based schemes; that the code underplays the role of provider and advisers; and that it fails to acknowledge that many employers with contract-based schemes see investment decisions as the responsibility of the employee.

"As it stands, this code feels a bit elitist," said John Lawson, head of pensions policy at Standard Life. "The intention should be to improve investment decision-making, regardless of who makes that decision. Pension schemes come in a wide variety of shapes and sizes, not just trust-based schemes with 3,000 or more members, and the code needs to recognise this reality."

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