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DISCUSSION PAPER PI-0808

Defined Contribution Pensions: Dealing with the Reluctant Investor

Alistair Byrne, Debbie Harrison and David Blake

Purpose – The purpose of this paper is to provide an overview of key issues
in the governance of defined contribution pension schemes, with a focus on
investment matters, and to recommend best practices.

Design/methodology/approach – The paper draws on the results of an online
survey of the opinions of pensions professionals and on interviews with
pensions professionals.

Findings – The paper finds that many employers and pension scheme trustees
are reluctant to take an active role in pension scheme design and to provide
support and guidance to members for fear of legal liability. Scope exists for
regulators and legislators to create “safe harbour” provisions that will encourage
employers and trustees to become more active in supporting members.

Practical implications – The paper makes a number of suggestions for best practice
in the design and governance of defined contribution pension schemes, for example,
in terms of the fund choice that should be offered.

Originality/value – The paper provides the first comprehensive review of investment
issues for UK defined contribution pension plans.

Keywords Pensions, Pension funds, Investments, Regulation, Governance,
Trustees, United Kingdom