TPR publishes first in series of DC good practice guidance

The regulator said the guidance was part of its commitment to promoting the good running of defined contribution schemes.

The guidance covers retirement options and the open market option in occupational DC schemes.

The regulator said planning an individual’s retirement was a critical process, which could result in an inappropriate annuity if a member was not given sufficient support.

A statement released by the regulator said: "Trustees have a duty to ensure that there is a process in place to convert the members’ money purchase fund into a retirement income.

"The retirement options guidance sets out good practice in key areas, and encourages trustees and employers of DC schemes to follow good practice likely to lead to informed decisions being taken and emphasise members the advantages of obtaining financial advice.

"Trustees must also ensure that members are aware of their right to exercise the open market option, where, instead of the scheme's process, they use their fund to buy an annuity from an insurance company of their choice. Shopping around for an annuity can often produce a higher pension income and the decision to purchase an annuity is irreversible, so it is important that members are able to make an informed choice."

TPR executive director of strategic development Chris Dobson said: "The retirement options guidance will help employers and trustees ensure they have effective processes in place, and inform members so they are able to make the best possible choices on their retirement income.

"This is the first of a series of planned materials aimed specifically at helping those running DC schemes; work which underlines our commitment to promoting good practice in DC schemes."

In coming months the regulator plans to issue:

- Question and Answers on DC schemes;

- Communicating with members guidance, good practice examples and case studies;

- DC scheme returns analysis; and

- Investment practices guidance.

These will be published on the regulator's website as they become available.

http://www.thepensionsregulator.gov.uk/guidance/dcScheme/retirementOptions/index.aspx