1 / 8

Defined Contribution: t he governance gap

Defined Contribution: t he governance gap. TUC Member Trustee Network Annual Conference 2013 Craig Berry. The Governance Gap: 3 main problems. Auto-enrolment is a windfall for contract-based providers (but they are not all bad!) Many trust schemes exhibit poor governance

travis
Télécharger la présentation

Defined Contribution: t he governance gap

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Defined Contribution:the governance gap TUC Member Trustee NetworkAnnual Conference 2013 Craig Berry

  2. The Governance Gap: 3 main problems • Auto-enrolment is a windfall for contract-based providers (but they are not all bad!) • Many trust schemes exhibit poor governance • Even good trusts operate in lax regulatory environment We don’t know how many people are in different types of trusts, or contract-based schemes with governance boards

  3. Private sector membership rates • Decline of DB, but also trust-based DC • Trust membership likely to increase • Good news (NEST) and bad news (master trusts)

  4. Governance Survey • 46% of DC schemes not review SIP in last 3 years (although legal requirement). • 8% never reviewed; 12% don’t have one; 12% don’t know • Only 14% of DC boards meet quarterly. 1/3 biannually and 1/3 annually • 61% have no training plan for trustees • Only 28% have formal TKU policy • 29% not used TPR code of practice/guidance • Conflicts of interest: 46% have no policy, 41% no means of identifying, 52% no register of interests • 29% have no risk register

  5. Governance Survey • Only 43% review charges annually • 28% very infrequently or never; 13% don’t know • 23% never review appropriateness of investment strategy • Only 49% have extremely good or very good understanding of AMC • TER – 31%. PTR – 16%. Total charges – 31% • Only 22% very good understanding of 6 principles • Remember this is all self-reporting. 97% believe they are very or fairly effective at governing scheme • Across all of these measures, DB and larger DC schemes are superior

  6. The Pensions Regulator code • Contract-based schemes: • Code not applicable to contract-based schemes • No guidance on establishing governance committees within contract-based schemes • Problems with trust-based scheme guidance: • Should improve charges disclosure but not strong enough on specific risks of specific charges • Not strong enough on annuitisation, etc. • Not strong enough on member representation • Focus on trustee conduct rather than trustee board composition – this is a major flaw re: master trusts • Final code actually diluted rules on MTs, because TPR recognised limits of its own powers

  7. DWP work on DC quality standards • Attempt to improve contract-based governance through provider-level governance bodies. • Several flaws: • Employers are responsible for choosing the scheme so members should contribute to instructions to providers • Range of powers? Conflict with shareholders? • Who sits on body – employers or employees? • What if there is conflict between schemes represented on governance body? • Need employer-level governance (small firms excluded) and provider-level scrutiny • Also flawed in terms of default fund reviews, and again overlooks master trust board composition • The scale question

  8. Conclusion:What should MNTs do? • Within schemes: • Member engagement, including full disclosure • Consider benefits of scale • Frequent reviews i.e. charges, investment strategy • Frequent meetings! • Training – arm yourself • Clearly defined powers and accountability • Blow the whistle! • Policy lessons: • Licensing – for both schemes and trustees • Employer-level governance; provider-level scrutiny • Rules on MNTs and independence more generally

More Related