Due Diligence & Regulatory Compliance
With more and more members now contributing to DC schemes, it is not surprising TPR has shifted its focus to DC. Trustees and employers are now in the spotlight and need to demonstrate they fulfil their regulatory responsibilities. As DC specialists we cover the full DC remit, whether it is supporting employers to shape their strategy on what type of scheme is best suited to the needs of their workforce; through to issue rectification and prevention. These costly issues can impact on both budgets and costly operational relationships.
Using our DC expertise we have assisted in evidencing the due diligence undertaken to demonstrate good governance against the DC Principles through:
- Improving effectiveness – helping to understand the current status and identifying how improvements can be made
- Supplier/adviser management – preventing silos developing and aiding the many different relationships needed to deliver the service
- DC Code & Compliance statement – a trusted and independent view ensures yours is not just a tick box exercise
- Administration effectiveness audit – tried and tested protocols for evaluating DC administration quality
- Product development and benchmarking – extensive market and provider research can help to place products, services and delivery in context
We have also worked with a number of Master Trusts to shape their offerings and improve governance – initially this was by working with them on the DC Principles. Now we are working with them to help them demonstrate the higher level of governance and compliance expected by TPR. We also support IGCs through operational governance and delivery assessments.
Case Study – Client Retail
The employer sought to bring DC administration in-house to sit alongside its team of DB administrators. The Trustees required comfort the in-house pensions team had the skills and systems in place and newly developed processes were robust enough to administer the DC section. We carried out an Audit Review of the team, systems’ capabilities and effectiveness of the process and procedural documentation.
KGC spent time onsite at the client tracking the existing and proposed DC processes with the relevant people within administration, HR and Payroll. Some of the areas we looked at were:
- Scheme benefit structure of the main DC section
- Administration Agreements between the Company and the Trustees
- Data flows from/to HR/Payroll/Finance
- Individual member processing
- Annuitisation process
- Annual events, such as salary increases
- Reporting to the Company and trustees
We identified a number of risks relating to the audited processes and gave recommendations to the employer to consider:
- Increased automation to reduce the risk of error or omission
- Implement a root cause analysis cycle
- Develop an overarching communication strategy
As a result the Trustees delayed the decision to bring the DC administration in-house and began working on our recommendations.
Case Study – Client Master Trust
The Trustees of a new Master Trust wanted assurance the out-sourced administration offering was fit for purpose and able to upscale when necessary.
We spent time on site at the administrator to:
- Understand its business strategy and growth objectives
- Interrogate its processes and procedures to identify any vulnerabilities and risks
- Understand its IT strategy and infrastructure
- Evaluate its resource planning
We compared the administrator’s capabilities to best practice requirements and made a number of recommendations for improvement. We advised the Trustees so their negotiations were based on a position of strength. Our objective evaluation gave the Trustees insight into their administration partner’s capabilities and enabled them both to create a solid foundation for the Master Trust.