The Royal Mail has taken the Minister at his word with its innovative proposals for a collective defined contributions (CDC) pension scheme which it claims will be fairer for all its employees. Though the scheme is not yet in force, enabling legislation is now expected in the Autumn. Royal Mail’s scheme will be defined contribution (DC) in style but its investments will be pooled and members’ retirement income will be paid directly out of the fund. It will target a similar level of benefits as currently provided by the organisation’s defined benefit (DB) scheme, with contribution rates of 6% employee and 13.6% employer for all members. Although benefits will be targets rather than being guaranteed, a guaranteed cash lump sum element is built up every year. It is expected that benefits under this CDC scheme will be more achievable because there is no need to switch to lower-return investments as the member approaches retirement. Instead benefits are paid directly out of the fund which will be focused on the consumer prices index plus 2%.
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TPR publishes consultation on reducing the number of poorly governed pension schemes 4 July 2019
The future of trusteeship and governance consultation outlines the problem of badly run pension schemes and considers how the trustee model can be made more effective.
In particular it poses questions to the industry about how to improve and evidence trustee knowledge and understanding, how to encourage diversity on boards, the role of accreditation and whether sole trustees are able to govern effectively.
David Fairs, Executive Director of Regulatory Policy, Analysis and Advice at TPR, said:
“We believe all savers should be in well-run schemes that deliver good value. This paper outlines how we are considering changing the way we regulate to achieve that.
The trustee model isn’t broken, but it does need to be greatly improved. There is stark evidence that the current system doesn’t work for all and there is a clear disparity between the experience of savers in well-run and badly-run schemes. If trustees cannot meet the standards we expect, we believe they should wind up and consolidate savers into a better run scheme.”
Questions posed to the pensions industry in the 30-page consultation include:
• Should there be an accredited professional trustee on every board? • Are sole trustees on a pensions board able to run pension schemes appropriately? • How can barriers to consolidation be removed? • Should a legal requirement be brought in for trustees to meet minimum standards of knowledge and understanding and ongoing learning? • How can diversity on pension scheme boards be improved?
Mr Fairs added:
“Despite our work, including through initiatives like 21st Century Trusteeship, there is still a subset of disengaged trustees who either refuse or are unable to improve standards in their schemes.
This clearly is not fair for savers - we believe that everyone saving for a pension should be in a scheme with excellent standards of governance and which is providing good outcomes for savers.”
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The Chartered Institute of Payroll Professionals
Payroll: need to know
cipp.org.uk
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