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The trm Report - November 2006 A key challenge for the regulator over the next three years, as set out in our medium term strategy, is to address the risks to members of DC schemes. To this end a consultation document has been published inviting comments on its proposals, along with the latest module on the established e-learning programme, the Trustee toolkit, specifically focused on DC schemes The consultation document, ‘How the Pensions Regulator will regulate defined contribution schemes in relation to risks to members’ highlights the five main areas of risk we have identified in DC schemes that we should be tackling in order to meet our objectives of promoting good administration and protecting members’ benefits. These risks are: poor administrative practices, poor investment practices, unduly high charges, poor decisions on retirement choices and lack of member understanding. Linda Oliver, policy and guidance team specialist, says: ‘As part of the regulator’s continued focus on DC schemes we have published this consultation document setting out the regulator’s proposals to addressing the risks to members of work-based DC schemes with either trust-based or contract-based arrangements. We look forward to receiving responses from industry. ‘We want to ensure that trustees, employers, providers, advisers, administrators and payroll providers understand the complexities and risks involved in running DC schemes and that they know how to address them. Thereby giving DC risks the attention they require, preventing them from materialising on a large scale and therefore protecting members’ benefits as far as possible.’ The consultation document sets out the regulator’s proposals for a three-pronged approach of education and guidance, partnership working and risk-based intervention – using existing regulatory powers and tools. Education and guidance We propose to build on work we are already doing in this area, including the recent launch of the e-learning module on DC schemes, by publishing practical guidelines setting out actions that can help to address the risks, based on existing good practice within the pension industry. Partnership working We propose to build on our existing strong relationships with other regulatory bodies and within the industry – and forge deeper relationships with wider audiences such as third party administrators – in order to develop our proposals further and implement them in a consistent way. Intervention Our risk-based approach means we will focus efforts where appropriate, for example, where persistent and/or significant failures by those running and providing schemes result in a poorly administered pension scheme which has a potentially material impact on members’ benefits. Where it is appropriate we will take decisive action which could include issuing third party or improvement notices, considering the appointment of trustees and publicly reporting advisers and service providers. The consultation period runs for 12 weeks from 13 November 2006; further information and the document is available at www.thepensionsregulator.gov.uk Trustee toolkit We know that education and guidance are particularly important to trustees and we have received exceptionally positive feedback from trustees welcoming this new learning tool. We want to further underline our commitment to this by launching a specific module covering DC schemes. The module, How a DC scheme works, offers a mix of tutorials and real-life case examples, enabling learners to experience the types of scenarios facing DC schemes and to take part in decision-making. Participants find themselves on the trustee board of a DC scheme and encounter a range of scenarios, such as dealing with a member’s complaint about the effect of charges and considering the implications of poor administration. The module links in with proposals in the consultation document by including learning on the five areas of risks covered in the document. The free online Trustee toolkit is designed to help trustees fulfil legal requirements to ensure they have the necessary knowledge and understanding to properly perform their role. Existing modules of the toolkit include subjects such as trust law, pensions law and an introduction to asset classes – all of which are of interest to both DC and DB schemes. Trustees can start their e-learning now by registering online at
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