A new guide has been launched to help trustees understand the level of protection in place for defined contribution (DC) scheme assets ahead of regulatory change expected later this year.
The guide, launched by the Security of DC Assets Working Party, is designed to help trustees ask the right questions of investment consultants, fund managers, platform providers and lawyers regarding the security of DC assets – and highlight key areas to explore when changing platform provider or fund managers.
The Working Party said the guide was produced in anticipation of The Pensions Regulator’s Code of Practice 13 which trustees will have to assess their schemes against later this year. It is also in response to increasing DC scheme membership numbers following auto-enrolment and the significant growth in master trusts.
Members of the group are from consultancies Hymans Robertson and LCP, law firms Sacker & Partners and Wragge, Lawrence Graham and Co, as well as Standard Life and the Association of Member Nominated Trustees (AMNT).
Security of DC Assets Working Party chairman and AMNT co-chairman Barry Parr (pictured) said: “We were keen to set up the Working Party to get more clarity on the issue and to help trustees understand what questions they should ask, particularly as the new [TPR] draft code requires that trustees not only understand the protections, but that they also need to share their assessment of these with employers and members. We’ve worked closely with a number of industry bodies, including The Pensions Regulator and the FCA and will continue to do so, on this issue, to try and get further clarity.”
Working Party member and Sacker & Partners senior associate Anna Copestake, added: “The first DC Code of Practice 13 stated that trustees should understand the levels of protection in place for DC assets. Many trustees assume that the assets of DC scheme members are covered by the Financial Services Compensation Scheme (FSCS), but that may not be the case and the levels of protection in place for members will depend on a number of factors, including whether funds are held directly on a platform or whether they are set up as ‘insured life’ funds or structures such as open ended investment companies (OEICs). The more we looked at it, the more complex the issue became. We were keen to give some clarity to the issue. We hope this framework will prove invaluable.”
