Six principles for good workplace DC
June 2012
Draft key
features
Delivering good member outcomes at retirement
Principle 1:
Principle 2:
Principle 3:
Principle 4:
Principle 5:
Principle 6:
Essential
characteristics
Establishing
governance
People
Ongoing
governance
and monitoring
Administration
Communications
to members
Schemes are designed
to be durable, fair and
deliver good outcomes
for members.
A comprehensive
scheme governance
framework is
established at
set-up, with clear
accountabilities and
responsibilities agreed
and made transparent.
Those who are
accountable for
scheme decisions
and activity
understand their
duties and are fit
and proper to carry
them out.
Schemes benefit from
effective governance
and monitoring
through their full
lifecycle.
Schemes are welladministered with
timely, accurate
and comprehensive
processes and records.
Communication to
members is designed
and delivered to
ensure members
are able to make
informed decisions
about their
retirement savings.
The features on the following pages have been produced
as a resource material for those providing and running DC
schemes, eg providers and trustees of both occupational
pension schemes and work-based personal pension
schemes. If present in a DC arrangement they are more
likely to result in a good member outcome.
Principle 1:
• All beneficiaries within a pension scheme are treated impartially and receive value for money.
Essential
characteristics
• All costs and charges borne by members are transparent and communicated clearly at point of selection to the employer
to enable value for money comparisons to be made and to assess the fairness to members of the charges.
• Those running schemes understand and put arrangements in place to mitigate the impact to
members of business and/or commercial risks.
Schemes are designed
to be durable, fair and
deliver good outcomes
for members.
• Those running pension schemes seek to predominantly invest scheme assets with entities regulated by the Financial
Services Authority (FSA) or similar regulatory authorities. Where unregulated investment options are offered, it must be
demonstrable why it was appropriate to offer those investment options.
• Those running schemes understand levels of financial protection available to members and carefully consider
situations where compensation is not available.
• Products offer flexible contribution structures to members and/or employers
(over and above minimum scheme qualifying thresholds).
• A default strategy is provided which complies with DWP default fund guidance and scheme investment strategy.
• The number and risk profile of investment options offered must reflect the financial literacy of the membership.
Different ranges of investment options could be offered to different membership ‘groups’.
• Investment objectives for each investment option are identified and documented in order for them to be regularly monitored.
• A process is provided which helps members to optimise their income at retirement.
continued over...
2
Six principles for good workplace DC Draft key features
Delivering good member outcomes at retirement continued...
Principle 2:
Establishing
governance
A comprehensive
scheme governance
framework is
established at
set-up, with clear
accountabilities and
responsibilities agreed
and made transparent.
• Sufficient time and resources are identified and made available for maintaining the ongoing governance of the scheme.
• Those running schemes support employers in understanding their responsibility for providing accurate information,
on a timely basis, to scheme advisers and service providers.
• Accountability and delegated responsibilities for all elements of running the scheme are identified, documented and
understood by those involved.
• Those running schemes establish procedures and controls to ensure the effectiveness and performance of the
services offered by scheme advisers and service providers.
• Those running schemes establish adequate internal controls which mitigate significant operational, financial,
regulatory and compliance risks.
• Arrangements are established to review the ongoing appropriateness of investment options.
Principle 3:
People
Those who are
accountable for
scheme decisions and
activity understand
their duties and are fit
and proper to carry
them out.
• Those running schemes understand their duties and are fit and proper to carry them out.
• Those running schemes act in the best interests of all beneficiaries.
• Those running schemes are able to effectively demonstrate how they manage conflicts of interest.
continued over...
3
Six principles for good workplace DC Draft key features
Delivering good member outcomes at retirement continued...
Principle 4:
Ongoing
governance
and monitoring
Schemes benefit from
effective governance
and monitoring
through their full
lifecycle.
• Those running schemes are open and honest with their regulators and regulatory guidance is
addressed in a timely and effective manner.
• Those running schemes regularly review their skills and competencies to demonstrate they understand
their duties and are fit and proper to carry them out.
• Sufficient time and resources are made available for monitoring and reviewing schemes to ensure that they continue to meet
good practice and continue to include the essential characteristics established under Principle 1.
• Those running schemes maintain procedures and controls to ensure the effectiveness and performance
of the services offered by scheme advisers and service providers.
• Those running schemes maintain adequate internal controls which mitigate significant operational,
financial, regulatory and compliance risk.
• Those running schemes take appropriate steps to pursue and resolve all late and inaccurate payments of contributions.
• Those running schemes monitor the ongoing suitability of the default strategy.
• The performance of each investment option, including the default, is regularly assessed against stated investment objectives.
Principle 5:
Administration
• Member data across all membership categories is complete and accurate and is subject to regular data evaluation.
• All scheme transactions are processed promptly and accurately.
Schemes are welladministered with
timely, accurate
and comprehensive
processes and records.
• Administrators maintain and make available their complaints process.
• Administration systems are able to cope with scale and are underpinned by adequate business
and disaster recovery arrangements.
continued over...
4
Six principles for good workplace DC Draft key features
Delivering good member outcomes at retirement continued...
Principle 6:
Communications
to members
• All costs and charges borne by members are disclosed to members annually.
Communication to
members is designed
and delivered to
ensure members are
able to make informed
decisions about their
retirement savings.
• Scheme communication is accurate, clear, understandable and engaging. It addresses the
needs of members from joining to retirement.
• Members are regularly informed that their level of contributions is a key factor in determining the overall size of
their pension fund.
• Members are regularly informed of the importance of reviewing the suitability of their investment choices.
• Those running schemes clearly communicate to members the options available at retirement in a way which supports
them in choosing the option most appropriate to their circumstances.
How to contact us
Napier House
Trafalgar Place
Brighton
BN1 4DW
T 0845 600 0707
F 0870 241 1144
E customersupport@tpr.gov.uk
www.thepensionsregulator.gov.uk
www.trusteetoolkit.com
Six principles for good workplace DC
Draft key features
© The Pensions Regulator June 2012
You can reproduce the text in this publication as long as you quote The Pensions Regulator’s name
and title of the publication. Please contact us if you have any questions about this publication. We can
produce it in Braille, large print or on audio tape. We can also produce it in other languages.