Uncertainty on IGC detail as providers get ready for April

These committees will be required to ensure contract-based schemes meet a minimum standard of governance. But legal experts have raised questions about how these structures will themselves be governed.

Helen Ball, partner at law firm Sackers, said it had seen an uptick in clients enquiring about IGC arrangements, and predicted a further increase over the coming months.

"We are expecting any day now the new [Financial Conduct Authority] rules," she said. "When we see those published you’ll see even more interest.”

The FCA is expected to produce a second set of rules that cover pension charges.

Tim Smith, partner at law firm Eversheds, said the lack of detail on some rules governing IGCs could limit the effectiveness of the committees in the early stages.

Providers will have an IGC in place by April. Whether they will be up to speed and will be able to hit the ground running, that’s a different issue

Tim Smith, Eversheds

He added: “There’s a lot to do to get ready, but providers are on it and will have an IGC in place by April. Whether they will be up to speed and will be able to hit the ground running, that’s a different issue.”

At present, committees and providers will have to seek member consent before enacting various measures, such as a change to the default fund.

Smith said members could benefit if committees and providers had the power to implement changes without getting that consent.

“The IGC might say to the provider they want a new [default fund], the provider agrees, but without member consent they can’t transfer people or funds to the new default fund," he said.

"We felt there was an opportunity for the government to introduce legislation that would allow provider and IGC agreement that could be as good as member consent.”

Mirroring trustee boards

In recent months industry figures have called for IGCs to function similarly to trustee boards.

Richard Butcher, managing director at independent trustee company PTL, said many in the industry have assumed providers would rely on independent trustees to serve on IGCs. However, he said they may not have the relevant expertise.

“The skillset required is radically different and the knowledge is radically different.”

Some experts expressed concern privately about the term limits on individual committee members - such as member-nominated representatives, compared with those of corporate members - fearing it may lead to "cosy" relationships between the scheme provider and the corporate committee members.

As it stands, an individual member serves on the committee for a five-year term, with the potential for a second. Although there is a requirement to change corporate trustee members at least as often as individual members, the appointment of a corporate trustee company to provide those members is not subject to a limit.

Ball, however, was unconcerned about the rules, saying: “I would see it as a very practical way of dealing with the situation. Each of these people who come from a corporate background, I think a lot of them are very independent.”