DC SPOTLIGHT


She notes that having carried out a review of


other providers, trustees can use the findings as evidence to help negotiate with their current provider by showing what they could get elsewhere. Similarly, Rona Train, senior investment


consultant at Hymans Robertson, says: “We generally find the best way to negotiate with providers is for trustees to carry out a review against similar providers and assess what fees (and support) would be available elsewhere.” She adds: “This will not necessarily lead to


a change in provider but can often lead to the existing providers ‘sharpening their pencil’ on fees or offering further services.”


understand what they have, howthey can build on that, and then howthey can access it. Ms Fearn says it is still very difficult for members


to do that: “The more I look at providers, the more I see how slow it is for them to get on top of everything in terms of digital journeys.” “We’ve got to really think more cleverly about how


we communicate with those members,” she says. While it is not necessarily cheap, and sometimes


a lot of time and effort is required to work on branding, graphics and the look of communications, “if you actually then see members being able to do what they want to do really easily then that is value- add in my view”, she adds.


More trustees push back on providers Increasing regulatory scrutiny of scheme governance is doing the trick, says Maria Nazarova- Doyle, principal at Mercer, noting that it is becoming more common for trustees to challenge their providers and negotiate reduced charges. It used to be that “not many trustees would test


TRUSTEES TEND TO REVIEW THEIR


the market or push back on the provider, [but] with increasing governance requirements and scrutiny in this area, more trustees are starting to do that”, she says. In fact, now is quite a good time to do so,


PROVIDER AT LEAST EVERY THREE YEARS


SURE THEY ARE STILL SUITABLE FOR THE SCHEME


TO MAKE


according toMs Nazarova-Doyle – noting that the DC provider market is currently very competitive in terms of price. “It’s a really good time for trustees to test the market – they don’t need to go to full tender, they can always just do a high-level cost quotation,” she says. If trustees find something better, they can move


to a different provider. “But also it opens up that negotiation with your current provider when you realise that maybe they’re not as competitive to the market as they could be,” Ms Nazarova-Doyle adds.


At-retirement changes give more options Negotiating lower charges is not the only change the trustees have been working on over the past scheme year. They have also reviewed their at-retirement policy for members. Prior to this review, DC members wanting to take an uncrystallised funds pension lump sum at retirement would have to transfer their pension pot out of the scheme. But the chair’s statement notes: “Following the review, the trustees changed the policy to allow DC members to take an UFPLS directly from the pension scheme at retirement, with effect from April 2019.” A member can choose either flexi-access


drawdown or UFPLS to take their pension pot a bit at a time. The UFPLS method means the member can take his or her tax-free cash gradually. Every time money is taken from a pension pot, 25 per cent of it is not taxed. The member must pay tax on the other 75 per cent of each lump sum. Some schemes might not be able to let a member


take an UFPLS directly from the scheme due to the administrative burden. Sometimes, in the trustees’ view, “it’s more work, it’s more [costly], it’s more governance oversight”, Ms Nazarova-Doyle says. Ms Train agrees that some schemes still do not


offer the option to take an UFPLS directly from the scheme due to the administration complexity and the operating cost. “Depending on the size of the scheme, allowing


member choice on retirement flexibility creates administration-management difficulty,” she says. Ms Train notes that “there is also a fine balance on


choice and guidance/advice needed for members to select retirement flexibility that adds to complexity and risk for a scheme to enable this”. She adds that in some cases the majority of


members in a scheme may not have built up enough funds to be able to consider this option, rather than cash. “This will change as admin systems, guidance and advice, and pot size at retirement increase,” Ms Train says.


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