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Employers can improve member outcomes on average by about 40–60%, crucially without the requirement for additional employer and employee contributions, according to JLT research Business benefit or blind faith?, if they adopt JLT’s ten recommended strategies.

If members qualify for an enhanced annuity – for example, if they smoke – this would add almost 60% to the eventual outcome.

The report argues that while the Pensions Regulator’s (TPR) guidelines for defined contribution (DC) pension scheme governance are valuable, they emerge from anachronistic and inappropriate defined benefit (DB) practices.

Under auto-enrolment, which is phased in from 2012, DC governance should focus on the delivery of pensions that, while not guaranteed, represent a clear return on the employee and employer’s investment.

The evidence based and outcome focused DC governance strategies will enable employers to evaluate in practical terms the financial relationship between the business investment in good DC schemes and the benefit this brings to both the employee and the company’s financial stakeholders. The strategies build on the principles established by TPR and convert DB governance theory into a practical DC tool that delivers a measurable return on investment to the business, as well as to scheme members.

Duncan Howorth, CEO, JLT Benefit Solutions, commented: "This research establishes a new set of principles, together with a best practice benchmark for DC pension governance under auto-enrolment. It does not seek to replace TPR’s guidance but to make it practical for business, so that employees and employers can achieve the best possible outcome from their DC schemes."

The ten strategies

1. Improve default funds in relation to investment and risk management.
2. Salary exchange and the adoption of "save more tomorrow".
3. Reduce annual management charge.
4. Automatic use of the open market option.
5. Automatic assessment for enhanced rates.
6. 1% increase in employee contributions (not required for the c. 40–60% increase in the potential pensions noted above).
7. Streamline transfers in of members’ legacy DC pots and a scheme facilitated pension tracing service.
8. Improve self-select investment fund evaluation.
9. Retirement management control evaluation.
10. Improve scheme governance committees with training for member representatives.

www.jltgroup.com