Many trustees are still asking questions about the chairs statement and the governance report required now in Defined Contribution (DC) pension schemes.
Statutory Instrument 879 of 2015 brought in this new requirement for DC or DC sections of hybrid schemes with a year end on or after 6 April 2015. However there are special provisions if the scheme year end falls within three months of 6 April 2015 (ie before 6 July 2015). This short accounting period can be rolled forward and included in the following years Chair’s Governance Statement.
In summary, in accordance with the Charges of Governance Regulations, the Chairs governance statement must:
Describe how the requirement to ensure the core financial transactions are processed promptly and accurately have been met
Include the trustees statement of investment principles governing decisions about investments in the default strategy (which is produced in addition to the governance statement)
Describe any reviews undertaken during the year of the default strategy or performance of underlying funds and explains actions taken as a result of the review
State the level of charges and transaction costs applicable to the default strategy during the year and the range of the levels of charges and transaction costs which are not part of the default strategy
Provide information on transaction costs which trustees or managers have not been able to obtain and an explanation of the steps being taken to get that information in future
Explain the trustees or managers assessment of the extent to which charges and transaction costs represent value for money
Describe how trustees requirement for knowledge and understanding have been met during the scheme year and explain how the combined knowledge and understanding to the trustees and managers together with advice which is available to them enables them to properly exercise their functions as trustee or managers of the scheme.
Because chairs have a legal responsibility for signing the Chair’s Governance Statement, they must be confident that the disclosures are robust and this will be underpinned by an assessment of internal controls that are relevant to the assertions in the statement.
Please click here to view a scheme assessment template which has been provided by the regulator.