This blog’s for any employer or adviser with an existing workplace pension scheme (GPP or Stakeholder Pension), where you chose the funds offered to your staff.
I asked a question of the Pensions Regulator this week. He’d put up this slide and I wanted to know what he meant by there being 2020 contract based schemes (see table above).
The Regulator didn’t have a very good answer but muttered something about “registered stakeholder schemes”. This brought back to me a practice I’d almost forgotten about.
In the early days of Stakeholder Pensions, providers were required to designate one of their funds , the default. There wasn’t much science about it, you just picked the fund most people used – usually marked “managed” or “balanced” and hoped that nobody would ask any questions.
Of course the big consultancies weren’t having that and demanded that providers produced bespoke defaults that followed what the client wanted (or more properly – what the clients were told they wanted). So all the early stakeholder schemes advised on by the actuarial consultancies had their own defaults and because they were designating, they became unique entitities.
It took a strong employer to say no. I remember a metal basher in the Midlands whose FD told me that he wasn’t risking having his own default on his plan because “who knew where that would lead”. He may be reading this, if so – my hat’s off to you Sir!
It seems to me that an Independent Governance Committee, under the rules put forward in the Command Paper, is really only responsible for one default, the default chosen by the provider. It follows that all these adviser driven defaults that are employer specific will need their own “independency governance committees”. This is alright if you are BT or Logica but not so much fun if you only have a couple of hundred people working for you.
Which is enough to make you think. Do you have a workplace pension scheme with your own default fund? Have you read the Command Paper? Do you fancy doing your own Governance? Have you spoken to your adviser about what to do next?
There’s a lot of work to do between now and 2015 to meet the tight deadlines of the paper, maybe you should be having a chat with your adviser and/or your provider to make sure you don’t get forgotten about.