Sackers’ Helen Ball sets out the key lessons for trustees as they start to prepare this year’s statements

Many DC scheme trustees are part way through, or starting to plan their second chair’s annual statement. This is the legal document that confirms what steps the trustees have taken to ensure good governance of their DC arrangements over the previous scheme year. But what lessons could trustees learn from the first round of annual statements, and the subsequent actions taken by the Pensions Regulator?

Helen-Ball-Sackers

Timing – you must meet the statutory deadline, which expires seven months from the end of your scheme year. If you don’t, the Pensions Regulator will issue you with an automatic fine of between £500 and £2,000 (and very likely at the higher end of the range if you have any professional trustees).

Support – you will probably need help with identifying default arrangements and establishing whether the charge controls have been complied with. There could also be challenges in identifying transaction costs and, to some extent, value for money. Be aware of potential conflicts of interest if a firm that provides you with administration or investment services also assists you with the value for money assessment. Most importantly, don’t leave it too late in the day to plan whose help will be needed and when.

Content – use your own judgment and don’t simply take what your advisers say at face value. Challenge and question what you have been told, check that the tone of any draft statement wording is right for your members and that it reflects the trustees’ own views. Remember that the Pensions Regulator’s DC guidance suggests you should explain the measures that have been taken to achieve compliance, not simply report that compliance has been achieved.

Evidence – keep an accurate record of why you have made certain decisions for future reference. For example, if you conclude that the scheme has efficient administration processes, make sure that you can demonstrate this in practice. You may be required to produce this evidence at a later date.

Objectives – focus on areas where the scheme is not reaching the standards that you want or expect. Spend time improving those areas that will make the most difference, rather than creating a random shopping list of “things to do”, particularly when considering what changes could improve value for members.

The second statements are likely to be more tailored and polished than those which appeared last year. We look forward to reading them with interest.

Helen Ball is head of DC at Sackers