The Financial Conduct Authority (FCA) has today confirmed the final rules requiring firms to set up and maintain independent governance committees (IGCs).
IGCs are a key part of the improvements in the governance of workplace pensions. The role of IGCs will be to represent the interests of scheme members in assessing the value for money of pension schemes, challenging providers to make changes where necessary. These rules, initially announced by the FCA in August, confirm for providers of workplace personal pensions the necessary detail to ensure IGCs are set up by April 2015.
Christopher Woolard, director of strategy and competition at the FCA, said:
“Pensions are complex and employees and ex-employees are often unlikely to know whether or not their workplace scheme delivers value for them. It is important that schemes are operating in the interests of members and IGCs are a significant step in a package of measures aimed at improving the value of workplace pensions.”
The establishment of IGCs was recommended after an Office of Fair Trading market study found problems with the workplace pension market including potential conflicts of interest between employers and schemes.
The FCA has been working closely with the Department for Work and Pensions (DWP) to ensure that all members benefit from the same good quality standards regardless of type of workplace scheme. New regulations have been introduced today by the DWP to ensure value for money in relevant occupational pension schemes.
From 6 April 2015 firms that operate workplace personal pension schemes will be required to establish an IGC, with at least five members, which will have a clear duty to act independently of the firm.
The rules outline the minimum standard for the terms of reference for IGCs, the scope of the IGC and which type of firms will need to set one up.
The FCA has confirmed that a review of the overall effectiveness of the new governance bodies will be conducted in 2017.
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