The Pensions Regulator's (TPR) statement on higher standards for defined contribution (DC) pensions has been welcomed by the industry for its moves towards further flexibility in engaging employees in DC plans.

The statement says TPR wants trustees to help members who are retiring to make the right decisions about their savings, with a particular focus on improving the standards of pre-retirement processes and member communication. TPR wants employers to engage responsibly with employees about their pension arrangements, and in turn said it will aim to ensure higher standards for DC pensions as well as a minimal additional regulatory burden.

The Regulator's Member Leaflet on retirement choices has been updated in an effort to help trustees ensure pre-retirement literature maintains a high standard, and includes information on annuities and other alternatives.

DC Trust: A presentation of scheme return data has also been published by TPR, its first analysis of the DC trust-based landscape, which looks at the current state of DC trust-based provision, and builds on work over the last three years which aimed to analyse the shape of the trust-based DC landscape and risks DC schemes face.
"It is more important than ever in these challenging economic times for members to make the right decisions to maximise value for money at retirement," commented Tony Hobman, chief executive at TPR.

"We know that our work on DC will enable trustees, employers, advisers and providers to improve the outcomes for DC scheme members. In the run-up to 2012 we are focusing on providing more education to assist employers with their pension provision and we are looking at the standards in key processes for DC pensions. We are willing to enforce better practice, if we need to."

Financial consultant Mercer's principal in the defined contribution business, Andy Parker, commented: "Sponsors of contract-based DC plans have long faced the problem of how to engage effectively with their employees on pensions whilst being mindful of the restrictions on financial promotions introduced in the Financial Services & Markets Act 2000. Although a 2005 amendment to the Act allowed sponsors to promote their contract-based plans to employees, this did not clarify how employers can govern their plans effectively; in particular communicating to employees around investment options remains an area of concern for employers."

Parker added that a clears and appropriate governance structure with defined duties in necessary for a company, and means they should not be fearful of taking decisions in the best interests of company and employees.

- Pensions Age July 2009

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