Hymans Robertson has highlighted a 'lack of governance' of defined contribution (DC) default investment funds in a recent research report.
Having surveyed 102 human resources and finance directors at companies with more than 2,500 employees, the consultancy said only 31% said they had an aim of “delivering a target level of replacement income in retirement”.
While a third of the companies surveyed admitted that they failed to regularly review the performance and suitability of their default investment fund, 59% said their review was within the past two years.
Hyman Robertson said 20% were “unaware” of whether their strategy was in line with their goals and a quarter had set their strategy “only with the loose aim of maximizing returns for members”.
Lee Hollingworth, head of defined contributions at the consultancy, said DC was not setup to deliver value for members at present.
“The evidence suggests that many DC schemes have been setup without any real thought as to the outcome or impact of their design, particularly from an investment point of view,” Hollingworth said.
He added there was a “clear disconnect between the investment strategy of schemes and the aim of achieving good outcomes for members in retirement”.
Hollingworth said it was necessary to review the scheme objectives and the default investment funds to determine whether the DC scheme is delivering.
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