The rise of DC governance

Due to automatic enrolment (which requires employers to make some form of pension provision towards their employees) and the high costs and regulation of defined benefit (DB) schemes, there has been an accelerating move towards the provision of defined contribution (DC) benefits in the workplace.

DC schemes provide money purchase benefits (defined in the Pension Schemes Act 1993, s 181—see Practice Note: Money purchase benefits—the statutory definition). In DC schemes (unlike DB schemes), the contributions paid into the scheme by the employer and employees are defined but the benefits provided by the scheme are not. Benefits are mainly based on the amount of contributions paid into the scheme (by both employer and employee), those contributions’ investment growth and scheme charges. The costs are more stable and predictable for the employer since employees bear the risk that their benefits may not be as great as expected if investments underperform.

The evolution of the DC workplace market had failed to provide DC members with minimum quality standards, raising concerns about retirement