DC governance: preparing the first Chair's statement

United Kingdom

This article was produced by Nabarro LLP, which joined CMS on 1 May 2017.

Pension schemes providing DC benefits (other than where the only DC benefits are AVCs) must have a chair of trustees (the Chair) in place by 5 July 2015. The Chair can be an individual trustee, a director of a corporate trustee or a professional trustee body which is a trustee of the scheme (e.g. a professional independent trustee). The Pensions Regulator is now asking for confirmation of the name of the Chair on the scheme return.

The key duty of the Chair is to sign an annual statement, covering a number of scheme governance activities. The statement will be available to members in the same way as the annual report and must be published within seven months from the end of the scheme year to which it relates. For scheme years ending before 6 July 2015, the Chair will not have to produce a statement until seven months from the end of the following scheme year (although will need to include relevant information from 6 April 2015). This means that the first statements will need to be produced for scheme years ending on or after 6 July 2015 (covering periods from 6 April 2015) with the first statements required in February 2016.

This may seem a long way off, but trustees (including the Chair) should already be making sure that they are carefully monitoring the various elements covered by the statement.

Further guidance is expected from the DWP on the content of the Chair's statement.

We are able to help trustees draft or review their annual statement.

Contents of the Chair's statement
  • Latest statement of default investment strategy.
  • Details of any review of the default strategy and resulting changes (or if no review, date the last review took place).
  • Descriptionof how the requirements in relation tocore scheme financial transactions have been met.
  • Report on charge levels in default funds and the range of charges in other funds and whether they deliver value to members.
  • Report on transaction costs, or an explanation of why they have not been able to obtain them and an assessment of the value they represent.
  • Assessment of how the combined knowledge and understanding of the trustees, together with advice available, enables them properly to exercise their functions.
  • Details of the recruitment process for trustees and a description of how members have been encouraged to make their views known (master trusts only).