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NAPF warns on 'governance gap' in DC schemes
10 September 2013
Calls for UK pension consolidation
In its response to a UK government consultation on standards in defined contribution (DC) pension funds, the National Association of Pension Funds (NAPF) has warned of a growing gap in governance.
The NAPF's response highlighted the current DC landscape, which it said was “fragmented” and warned schemes were increasingly being used for auto-enrolment “without good governance”.
Darren Philp, NAPF Director of Policy, said: “With millions of people being auto-enrolled into DC pensions over the next few years, it is essential that pension schemes are capable of getting good results for savers. We are pleased that the Government is considering minimum legal standards for DC pensions.
“Securing good outcomes for pension savers requires strong governance. More needs to be done to raise standards of governance across the piece and ensure there is always someone effectively and independently representing the member.”
The NAPF has called for fewer, larger and better-governed schemes, arguing that such schemes result in better economies of scale and lead to better outcomes for members.
Philp added: “While trustees have a duty to uphold members’ interests, more can undoubtedly be done to ensure that trustees have the time and resources to properly consider their DC schemes.
“There is an inherent governance vacuum in contract-based schemes but the situation is not unmanageable – there are many excellent contract-based schemes where the employer steps up and takes responsibility for governance. It makes sense that governance sits at employer-level in these schemes.”
The NAPF argued that mastertrusts – multi-employer trust-based schemes, such as the government-backed National Employment Savings Trust (Nest) – were more likely to deliver for members “but we need to ensure that they meet minimum standards”.
Philp added: “We think the Government needs to revisit a couple of its proposals, for example whether it is feasible to give commercial providers a trustee-style fiduciary duty. But we support the broad direction of travel and will work with the Government to overcome these obstacles.”