Andrew Warwick-Thompson discusses the DC 'how to' guides video transcript
Interviewer: Andrew TPR has launched a consultation on a series of ‘how to’ guides for DC scheme trustees, could you explain the purpose of the guides and how they fit within the revised DC code?
Andrew Warwick-Thompson: Well the idea of the code is that it sets out the bare bones of what trustees have to do to comply with the law. And we consulted a lot about that and people said they wanted it short and pithy so they got a short and pithy code. And the idea with the guides then is to flesh that out to explain precisely to the trustees how they can demonstrate compliance with the law.
Interviewer: And what areas within governance and administration do the how to guides tackle?
Andrew: Well they start at some fairly big picture things like how the board operates, and in fact that really applies to any board of trustees it doesn’t just have to be a DC scheme. It also looks at the skills that trustees and managers need to have to run pension schemes. It looks at administration, it looks at value for members, it looks at investment and it looks at communications and reporting. So the six areas of the code are reflected in the six how to guides.
Interviewer: And are those areas you’d expect trustees to be adhering to and meeting certain standards, are these the things you’d expect trustees to be doing?
Andrew: Well the guide sets out those things really, those are the basic hygiene factors, how do you comply with the law? And that’s the code, what must you comply with. The guides themselves are there to give examples of, in some cases, best practice where it exists or just some examples there are a lot of examples in the guides.
Interviewer: You talk a lot about basic hygiene duties for trustees, what do you actually mean by this?
Andrew: Well the two examples that we’ve used most and where we’re focusing a lot of attention are the scheme return, and we know that there are some DC schemes that are not very good at doing scheme returns, so we have a particular focus on driving up the standards of scheme return completion.
And the other basic hygiene factor which is actually determined by what you put in the scheme return is the chair’s statement. And one of the reasons we have such a focus on the scheme return is that’s where you declare whether you’ve completed the chair’s statement.
And if you don’t send a scheme return we don’t know whether you’ve done a chair’s statement and you’re probably going to get fined so we need to focus on that area.
Interviewer: When will TPR’s response to the consultation be published and when will the guides and the code be introduced?
Andrew: Well the consultation has started now and that will run through until May. We will publish the final version of the guides together with the consultation response at the same time as the code goes live which will be in July. So all of the new documentation for this year will go live in July.
Interviewer: And finally in the context of freedom and choice reforms could you tell us what you’re seeing in this area generally and how the guides might help trustees and ultimately savers?
Andrew: I think what we’re seeing in freedom and choice is a relatively slow uptake with occupational pension schemes particularly DC schemes. One of the reasons for that is that they’re quite new, scheme membership tends to be younger so there’s not a huge number of people in DC schemes especially those that have been set up for the purposes of AE where you’ve got 55-plus members who could access the new flexibilities.
The other thing we found when we spoke to trustees and employers over the course of the last year is that, in some cases, the service providers to occupational pension schemes are not in a position to support the provision of flexible benefits through the pension schemes. So there’s a sort of time lag between the changes in the law and the speed at which service providers can actually build new systems and products and services to support trustees.
In terms of the guides, the guides don’t talk a huge amount about freedom and choice there are some aspects of the administration guide that covers those and there are some aspects of value for members. Value for members applies to the accumulation and the decumulation phase if that’s provided through the scheme.
Interviewer: Andrew thank you very much.
Andrew: Thank you.