A quarter of FTSE 100 defined contribution (DC) pension schemes do not have a service level agreement (SLA) with their scheme administrator, according to research by Watson Wyatt.
The management consultancy firm says a total of 56% of contract-based schemes do not have a SLA, the part of a service contract that defines service level, while 84% of trust-based schemes do.
Paul Macro, a senior consultant at Watson Wyatt, says: "There is definitely a need for further progress to be made on DC governance, especially for contract-based schemes.
"It is fairly standard for trustees to be aware of the need to monitor the schemes. In contract-based schemes, there is no one who holds that responsibility and there is a gaping hole in the protection for members."
The research also shows 74% of DC schemes have mechanisms for investment monitoring, which include keeping members informed of changes regarding their investment manager, such as senior staff moves. A total of 91% of trust-based schemes and 33% of contract-based schemes have monitoring mechanisms.
Scheme members receive feedback on their pension in 40% of DC schemes giving them access to updates. A total of 42% of trust-based schemes and 33% of contract-based schemes give members feedback routes.
Watson Wyatt attributes the failure for contract-based schemes to provide members with investment and feedback systems to the fact that only 28% have a governance committee to oversee such arrangements.
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