Many trustees are struggling to meet the expectations outlined in TPR’s DC code of practice, according to a study by Towers Watson.

The study, which undertook assessments of around 120 DC plans with total assets of £12.5bn and 480,000 members, found trustees fall short in areas of governance, administration and communication, including transparency of costs and charges to members and assessing value for money.

Towers Watson senior consultant Nick Cook said there are a number of new areas that even the most developed and sophisticated plans will need to take additional action on to demonstrate good practice.

“Trust-based DC pension plans are going through a period of radical change, such as benefits to members and how they are expected to be governed by trustees,” he said.

Analysis by Towers Watson found in other areas trustees are matching or outperforming the expectations of the code. These areas include reviewing investment fund performance, investment objectives and the default strategy, investment decision making, avoiding conflicts of interest and understanding trustee’ duties.

It also revealed targets set by trustees themselves in their action plans for future governance activities tended to be higher than the regulator’s expectations in almost all areas.

“It is good to see that in what is currently a challenging environment for DC plans, trustees are generally doing a pretty good job and clearly have their members’ interests at heart. Where trustees are not meeting expectations, this is often because the requirements are new and are not necessarily straightforward,” said Cook.

April 2015 will see the introduction of new minimum governance standards for DC plans, which will require TPR to update its DC code.

Cook stated this will result in “greater and more onerous requirements in some of the areas that we have seen that trustees are already struggling with, such as assessing value for money”.

Compliance levels are set to get tougher and trustees need to address any issues they have sooner rather than later, he added.

Share Story: