DC pension schemes are risking letting down members because they lack a strategic objective.
To mitigate this, PTL has created a DC scheme mi
ssion statement and blueprint which defines a strategic objective and clear principles for trustees to set the standards of their DC pension scheme against.
In a nutshell, the mission statement for any DC scheme should be to provide robust and proactive defaults and an environment where members can make informed decisions. Its purpose is to give a direction of travel to the governance of the pension scheme. It is an aspiration to be used constantly to guide trustees as they exercise their responsibilities.
Without a mission statement, schemes lack purpose. It’s the same as starting out on a journey with no idea of the destination.
The principles of PTL’s mission statement include:
- Key information: Scheme default options include those relating to investment strategy, decumulation, communications and any other defaults used.
- Relevant: Defaults should be based on member research including the age and earnings profiles, their appetite and tolerance of risk and aspirations. The more information that is gathered the more relevant a default can be.
- Intent: Defaults need to have an intent in order that scheme sponsors, trustees, governor and members can make informed decisions. The intent could be expressed as, for example, a replacement income ratio or a fund size relative to earnings.
- Proactive: As the world is constantly changing, all defaults should be reviewed and, if necessary, reset from time to time to reflect the changing economic and regulatory environment and changing social expectation.
- Informed Decisions: Although not all members will want to make decisions at every stage of their DC journey, the scheme should strive to provide an environment where members can make informed decisions where there is a high standard of education and communication using all available tools.