What is a default fund? This is the investment vehicles that are selected automatically for a member by their employer when joining a pension scheme unless the member specifies an alternative. It simply means members of a pension scheme are invested in a fund to participate in market returns If they don’t choose a fund when they join their scheme.
The regulators expect your employers as part of their duty of care to carry out a review of the default fund option with regards to the membership profile.
- The design
- Performance
- Continued suitability of the default option and its investment strategy should undergo a full review by your employer at least every three years.
A review may also be appropriate when certain events occur that could be reasonably expected to have an adverse impact on the appropriateness of the default option. A typical example could be consistent overperformance or underperformance of the underlying funds used in the investment strategy or change of employer structure or member demographic (an acquisition or a merger) or significant changes in the financial markets or economy or significant and relevant legislative changes occur. Your employer should be able to demonstrate that a review has been carried out. If any action is taken as a result of the review this information should be clearly communicated to members. Similarly, if the designated party concludes that it would be inappropriate to make any changes suggested by the review, the reasons for not making those changes should be fully documented and information should be available to members.
When last did you review your default fund?
Does this remain appropriate for your employee?
When last did you have your work pension scheme reviewed?
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