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UK Pensions Speedbrief: Pensions Regulator issues six DC ‘how to’ guides for consultation

  • United Kingdom
  • Pensions


The Pensions Regulator has launched a consultation for six ‘how to’ guides to help trustees implement its revised defined contribution (DC) Code of Practice, which is due to come into force in July 2016. The guides contain practical guidance and highlight examples of best practice on issues such as the composition of trustee boards, DC investments and assessing value for members.


Last November, the Regulator issued a new draft Code of Practice on the governance and administration of defined contribution schemes for consultation. The Regulator has taken the decision to keep the new Code much shorter than the current version, with much of the practical guidance instead being set out in a series of accompanying ‘how to’ guides. This will allow it to issue new or revised guidance more easily in order to keep pace with best practice as it evolves.

The consultation on the draft guides closes on 11 May 2016.

The ‘how to’ guides

The six draft guides published by the Regulator for consultation and the key areas covered by each are:

1. The trustee board draft guide

This focuses on the make-up and operation of the trustee board, covering key areas such as:

• assessing the fitness and propriety of trustees and the need for succession planning

• selecting a Chair of trustees (including the skills it would be useful for a Chair to possess)

• the composition of a trustee board (including the need for diversity), and

• trustee board meetings (including topics that should be covered at every meeting).

2. Scheme management skills draft guide

This focuses on the knowledge, understanding and skills required to run a pension plan covering key issues such as:

• assessing, obtaining and improving the skills of individual trustees (including individual performance appraisals and annual evaluation of the performance and effectiveness of the trustee board as a whole)

• identifying core areas where training is required and the need for training plans

• appointing advisers and service providers (including the issues to consider when developing selection criteria and when reviewing contracts), and

• risk management and managing conflicts of interest.

3. Administration draft guide

This recognises the fundamental importance of good administration and covers key aspects such as:

• reports from administrators (including minimum content that these should include) and putting in place effective service level agreements

• disaster recovery and business continuity planning

• ensuring the accuracy and promptness of core financial transactions (including payments, transfers and the investment of contributions), and

• data and record keeping.

4. Investment governance draft guide

This focuses on key issues facing trustees in relation to DC investments covering:

• investment decision-making, delegation and fiduciary management

• investment stewardship (including the exercise of voting rights)

• designing investment strategies (including the default) and setting objectives, and

• monitoring, reviewing and changing investment funds.

5. Value for members draft guide

This focuses on the process and approach to assessing value for members and covers:

• the steps involved in assessing value for members

• identifying and reviewing transaction costs

• addressing poor value, and

• restrictions on costs and charges.

6. Communicating and reporting draft guide

Member engagement is the key driver behind this guide which covers:

• knowing your membership and seeking their views

• the need for accurate, clear, relevant and plain English communications

• communications at retirement and risk warnings (including a good practice process and example risk warnings), and

• preparing a Chair’s annual statement (including the need for it to be easily accessible to members).


As expected, much of the material that might otherwise have been included in the new DC Code is set out in these draft ‘how to’ guides. At 128 pages, the combined length of these guides is almost three and a half times the length of the draft Code itself. In this space the Regulator adds a lot of colour to what it expects from trustees of plans with money purchase benefits.

The guides also go further than the Regulator’s existing guidance in a number of significant respects, including:

• indicating that the need to deliver good value applies to all members, regardless of whether there is a legal duty to assess this, and for the full period that a plan is responsible for a member’s funds,

• a call for greater diversity on trustee boards, and

• the need for a proactive approach to investment stewardship and the exercise of voting rights.

Aside from the obvious challenge of navigating around this guidance, one of the key issues with the guides is that the line between practical suggestions and minimum regulatory expectations is not always clear. For example, the “illustrative approach” to assessing value for money contains 27 “shoulds”. This makes it difficult to be sure what is required of trustees and what is simply intended to provide a helpful steer.

One thing that is clear, however, is that the standards expected of trustees of plans with money purchase benefits are further increasing, meaning trustees need to engage with this new guidance and, where relevant, raise their game.