UK – Provider-level governance boards within UK contract-based pensions risk being merely "cosmetic" if they are not granted sufficient powers, the country's union umbrella group has said.
Craig Berry, pensions policy offer at the TUC, also questioned whether contract-based schemes should be allowed to receive auto-enrolled workers.
Praising the Department for Work & Pensions (DWP) for "moving in the right direction" by addressing governance within defined contribution (DC) schemes in a recent call for evidence, Berry nonetheless questioned whether some of the proposals should be pursued.
"In the context of contract-based provision, it's pleasing the government is starting to consider how it can be improved with, perhaps, provider or employer-level governance bodies," he told IPE.
However, he said the TUC's initial view was that the proposed boards – which the department suggested could either be at the scheme or provider level – risked being "fairly cosmetic".
"We need to make sure that doesn't happen, which will be about who the boards are composed of, their range of powers and resources," he added.
"We would not like to see a veneer of governance within insurance companies that actually doesn't make much difference in practice."
Berry reiterated his view that governance had been overlooked in last year's paper on reinvigorating workplace pensions – largely focused on pensions minister Steve Webb's proposals for a defined ambition framework.
He also said there needed to be a "fundamental rethink" around the use of contract-based schemes for auto-enrolment, and questioned whether they were the right vehicle to use in a policy that benefitted from member inertia.
"We've seen the benefit of that with the low opt-out rates, and that kind of approach to workplace pensions needs strong governance, which usually equates to trustee governance," he said.
"[Contract-based funds] will always have a place in the pensions landscape, but auto-enrolment involves unengaged, inert savers."
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