1. Pensions Authority Update
New Codes for Defined Contribution Schemes
The Pensions Authority (the “Authority”) has published the second and third tranches of a proposed four sets of codes of governance (the “Codes”) to be published in 2016 to help trustees of defined contribution schemes (“DC Schemes”) meet the Authority’s standards of practice for good scheme governance and administration. The Codes are not statements of law but rather they are intended to supplement the Authority’s Trustee Handbook. These codes do not apply to defined benefit schemes but many of the same principles do. The first tranche was published on 27 January and included Codes on the establishment of a governance plan of action, procedures for trustee meetings and the management of conflicts of interest.
Set 2: Codes relating to contributions, investment and payment of benefits
These Codes give trustees guidance on: monitoring the payment of contributions to a scheme; investing scheme assets in the interests of beneficiaries; and making arrangements for the payment of benefits as they become due. The Codes set out how the trustees may choose to delegate their relevant functions (e.g. to an administrator or an investment manager) but it is stressed that trustees are ultimately responsible for functions carried out by any agent on their behalf. It is recommended that a service level agreement should be entered into between the trustees and the scheme administrator/investment manager.
Comment: Many schemes will have written administration agreements but it may be prudent to review how up to date the agreements are and the level of reporting/monitoring of the service levels.