The Unilever UK Pension Fund has set up a defined contribution committee to boost three key areas of management of its members' savings.
Schemes are increasingly setting up DC committees as more defined benefit schemes close to future accrual, auto-enrolment increases the membership of these arrangements and the Pensions Regulator beefs up its requirements.
The committee, which was set up last year, looks at governance, administration and communication, according to the fund's 2013 annual report.
We decided the best way to ensure our members have effective DC governance was to set up a new committee
“The DC committee was set up to provide increased focus by the trustee board on the governance, investment monitoring, administration and communications for our relatively small but growing DC arrangements,” said Andy Rowell, head of trustee services for Unilever UK.
The £6.6bn fund’s previous structure comprised committees covering investment and funding, audit and risk, and operations and benefits.
The trustees felt DC governance sat across all of these committees rather than any one in particular.
“As such, we decided the best way to ensure our members have effective governance was to set up a new committee to look specifically at the DC arrangements,” he added.
The committee also monitors the investment performance of the DC plan and the legacy additional voluntary contribution arrangements.
Schemes in the trust-based world overseeing both DC and DB arrangements are increasingly setting up committees to ensure adequate time is spent on DC governance issues, according to Rona Train, senior investment consultant at Hymans Robertson.
“Best practice is for [the scheme] to set up or create an objective matrix with scheme-specific objectives in all areas of DC,” said Train.
These aims should then feed back into the 31 quality features set by the regulator, she said.
How Unilever's committee works
The fund has drafted a governance plan setting out the range of their activities and has developed a set of objectives for the board of trustees to measure its performance against.
Setting up the new committee has given the trustee board an increased awareness of the different ways they need to communicate to members about their DC and DB benefits, said Rowell.
There are five members on the Unilever committee, one of which is an independent DC professional.
“This individual brings DC as well as DB knowledge and experience to the committee and can bring a fresh perspective to the ways of working of the board,” said Rowell.
Debbie Falvey, DC proposition leader at Aon Hewitt said, committee members tend to have a DB background and so have had to convert to a new way of thinking. It is good practice to include a member of the DC scheme on the committee, she added.
“They’re the ones who understand what it’s like to be member of that scheme more than anyone else,” said Falvey.
Unilever’s final salary plan closed to future accrual of benefits in June 2012 and active members were moved to a career average plan.
