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05 Nov 2014

IMA Proposes Standards for Pension Investment Governance

The Investment Management Association (IMA) has recently proposed a set of quality standards for investment governance processes, which can be applied to investment strategies of defined contribution pension schemes, the Investment Funds website reports.

The aim of these standards is to help ensure that consumers get the best possible outcomes from their investments.

Since the Financial Conduct Authority´s (FCA´s) consultation about the proposed rules for Independent Governance Committees for contract-based pension schemes, the IMA has outlined its proposal in response.

The body has also expressed support for the government´s efforts to improve defined contribution (DC) pension schemes in the workplace.

The approach being put forward by the IMA would provide a number of useful features, including a practical roadmap for developing and implementing default investment strategies; a document for employers who need to ensure that they´re selecting a default arrangement that is fit for purpose; a ‘one stop shop´ for assessing behaviour and ensuring that contract requirements are met; and a flexible procedure able to evolve over time and adapt to changes in the market.

The IMA´s director of public policy, Jonathan Lipkin, explained that:

“Independent governance committees are a step in the right direction. With millions of people being auto-enrolled into defined contribution default strategies, good investment governance […] has never been more important.”

“As part of this focus on quality, the IMA has proposed a set of standards for investment governance to ensure that DC default strategies are fit for purpose.”

Their approach would be applicable to both contract and trust-based schemes, Lipkin advised, setting “actionable goals which would offer a practical and consistent way for all DC schemes to demonstrate that they are delivering on behalf of scheme members.”

“We look forward to working with the government, regulators and other stakeholders in further developing this initiative,” he stated.

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