Andrew Roberts' blog: Governance in small trust-based DC schemes

We start 2014 knowing that the Pensions Regulator will be looking to improve governance in small trust-based DC schemes following the publication of Code of Practice 13 in November. This followed comments by Andrew Warwick-Thompson that in his view there are too many small schemes in existence.There are around 40,000 small schemes (less than 100 members) and all but around 4,000 of these are micro schemes (less than 12 member i.e. SSAS-type schemes). So it is tempting to take this as an attack at SSASs in particular, but I do not believe that SSASs are the focus.The issue being flagged is that employers offering small schemes on a trust-based than a contract-based structure are less likely to give their employees value for money. This is coupled with a presumption that smaller schemes do not have the same governance levels as larger trust-based schemes that naturally can benefit from economies of scale. (Governance to occupational scheme is akin to "systems and controls" for personal pension plans).{desktop}{/desktop}{mobile}{/mobile}There are some good lessons that can be learned from the Code of Practice which could be applied to SSAS. The Code covers such areas as trustee knowledge and understanding, investment options and member communication as well as more generic administration and governance issues. It is sensible to make sure member trustees of SSAS appreciate their role in the scheme and the Code and its supporting documentation provides useful suggestions to help with this. But not all of the Code seems applicable - the section on dealing with investments does not always fit with the member-directed nature of a SSAS.Of course many engaged member trustees enjoy the self-managed nature of a SSAS and would not wish to pay more from their limited pension resources simply to demonstrate that they know what they are doing. The ultimate conflict, of course, is that improving governance standards will come at a cost; and the regulator is already worried about pension costs.{desktop}{/desktop}{mobile}{/mobile}As I have previously noted, the regulator may need to look more closely at single member schemes. These schemes do not have to be registered with the Pensions Regulator, who keeps a log of all other trust-based schemes. Given the fears about pensions liberation and easy step would be to require these schemes to register. There is a levy to pay to register (£29 for a small scheme) and some online filing and so costs will creep up for these schemes. Nevertheless, it seems a natural first step for the Pensions Regulator to understand what is going on in and spot any trends.I expect 2014 will bring about changes to various degrees in the regulatory oversight of DC schemes whether they are single member, up to twelve members or up to 100 members.

Andrew Roberts' blog: Governance in small trust-based DC schemes

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