UK - Employers cannot avoid management issues on pensions simply by choosing a stakeholder or group personal pension plan, Watson Wyatt warns.
The consultant says employers should not be “fooled” into thinking that avoiding the need for trustees will absolve them of ongoing governance responsibilities.
Senior consultant Gary Smith said these duties were not based on law but “business sense”.
He said: “It is in the interest of the employer to maintain a scheme governance structure for their DC scheme in order to achieve maximum return from their investment and minimise the risks to the business.”
He added that employers were becoming more aware that any “hitches” in a scheme’s operation could undermine and devalue the employer’s pension investment in the eyes of the employee.
And that a structured approach to managing the scheme’s operations was a “small price to pay” for safeguarding the organisation’s financial commitment.
He claimed a risk assessment exercise for stakeholder schemes could identify a long list of potential risk areas including general management, the scheme provider’s administration and member communication. He also said a structured approach to managing the scheme’s operations could minimise the potential for “significant damage or financial liability”.
Smith said: “An organisation setting up a stakeholder scheme is likely to be started by a group with relative expertise and experience, and getting this group to fulfill a governance role should be a relatively small step to take – and certainly one that will pay back significant dividends to the business.”
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