DC hot topic – Asset security

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Following the introduction of automatic enrolment and an increasing regulatory focus on DC governance, DC asset security is now in the spotlight. However, not all trustees feel comfortable that they understand the risks and mitigations associated with their DC arrangements.

Why do trustees need to know?

TPR’s DC Code requires trustees to give “due consideration to [DC] asset protection and understand what would happen in the event of a problem”. As part of their review, it suggested that trustees consider counterparty risks, the creditworthiness of the DC provider and the extent to which a loss of assets might be covered by a compensation scheme or indemnity insurance. TPR’s revised DC Code, published in July 2016, requires trustees to assess how any loss of scheme assets might be covered by a compensation scheme and “to communicate the overall conclusion about the security of assets to members and employers”.

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