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Regulatory guidance

Regulatory guidance

Employer engagement

Voluntary employer engagement in work place contract-based pension schemes

This guidance provides help to employers offering a contract-based pension scheme who choose to involve themselves more closely in monitoring the running of the scheme.

The Pensions Regulator believes that contract-based pension schemes, like other types of schemes, benefit from periodic review. It is for employers to decide what arrangements for the governance of contract-based schemes they wish or need to have beyond their legal obligations (to pay contributions on time, for example).

This guidance is not meant to impose further obligations on employers with contract-based schemes.

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Key points

  • This guidance is aimed at employers of all sizes who offer a contract-based pension scheme. We recognise that schemes vary in size from the large to those with very few members. It will also be of interest to providers of contract-based schemes and advisers. Employees of relevant employers may want to share the information in the guidance with their employer if not already aware of it.
  • We believe that it is in members' best interests if all employers with contract-based schemes, particularly larger schemes, put in place arrangements for the schemes to be periodically reviewed. It is for employers to decide whether they want to do this, and, if so, how they go about it, although all employers must ensure that they comply with their legal obligations. There are many ways that a contract-based scheme may be reviewed - many employers choose to rely heavily on their adviser.  
  • Many employers have already put in place such voluntary governance arrangements as they see them as beneficial for both themselves and members. Examples of positive impacts include early identification of any administrative problems in the running of the scheme; monitoring the charges and competitiveness of the contract over time in the light of market developments; improving member understanding, for example, by providing access to advice; minimising the number of member complaints. 
  • There is no 'one-size-fits-all' governance solution and employers will want to find an arrangement that suits their own situation. For example, a large national employer with multiple sites offering a group self-invested personal pension scheme is likely to take a different approach to an employer with three members in their stakeholder scheme. Our recent research found that approximately half of employers with a contract-based scheme have some form of governance arrangement over and above that legally required. This ranges from a very informal review on an ad hoc basis by employer representatives through to more formal arrangements involving a wider range of parties, which may involve employee representatives.