On Monday 4 April, the Pensions Authority released the second tranche of codes of governance for defined contribution schemes, covering the following three areas:
- Collection and remittance of contributions
- Investing scheme assets
- Paying benefits
The first new codes suggests that trustees should establish a payment schedule and processes for monitoring contributions. It also recommends that appropriate arrangements are put in place to cover temporary absences. Given the importance of trustees’ role in ensuring that contributions are paid correctly, it also suggests a timeframe of three months for reporting any material failures to the Pensions Authority.
The second of these new codes relates to the appropriate investment of scheme assets. Trustees should ensure that the investment options offered reflect the needs of the membership and that these are reviewed on a regular basis. A particular focus should be placed on the default investment strategy, which again should reflect the needs and profile of the particular scheme’s membership. Trustees should also consider value for money and try to keep investment management costs as low as practicable.
The final code released yesterday sets out trustees’ responsibilities regarding paying benefits to members when they fall due.
The Pensions Authority’s objective in releasing these codes is to support trustees in ensuring good governance of their schemes and ultimately delivering better outcomes for members. While the codes are not mandatory, trustees will be expected to carefully consider the codes and how these may be implemented. The first three codes of governance (covering a governance plan of action, trustee meetings and managing conflicts of interest) were released in January 2016 and further codes will be released throughout 2016.
The Pensions Authority provides details of the six codes released to date on its website.