Matthew Blackburn, a pension consultant at Paradigm Partners LLP, outlines the questions employers should be asking about independent governance committees
We know that providers of contract based workplace pension schemes will have to put in place Independent Governance Committees (IGCs) from April next year and that the Law Commission has recommended that IGCs should have a statutory duty to scheme members to act in their interest ‘with reasonable care and skill’. What can employers look for when selecting a GPP for automatic enrolment for their workers?
· Is there a clear governance policy in place?
· How are workers’ voices represented to the committee?
· Is the charging structure clear and can it be compared against other providers?
· Are charges clearly disclosed to workers?
· Does the scheme provide value for money?
· Does each investment option available including the default fund have objectives that are reviewed regularly for ongoing suitability?
· If changes are needed to the investment options, how will these be carried out and what level of worker involvement will be needed?
· Are the investment options and their risk profiles including the default option suitable for the needs of the workers?
· Do the different investment strategies available including the default fund take into account the upcoming changes to how retirement benefits can be taken?
· Does the provider contact employees regularly explaining
o how much they have contributed
o where their payments have been invested and how they have performed
o what the charges are
o what their potential retirement fund may be
o whether their target amount could be reached based on the current level of contributions?
· Are scheme communications clear, understandable and engaging and do they address the needs of employees from the moment they join until they retire or leave the scheme?
· Are retirement options explained clearly to the workers when they approach retirement?
· Can the provider demonstrate that the data they keep for all employees is accurate and reviewed regularly so that employees can be contacted regularly and get the information they need to check how much they have in their retirement pot?
Employers will need to keep their workplace pension arrangements under regular review to ensure that they remain suitable for their workforce. For medium to larger size businesses it could be good practice to set up their own governance committee to oversee this.