However the story below seems to be more in the self-interested camp. I'm particularly struck by the implication that trustees of DC schemes are at fault because trust-based DC schemes often offer "only" four or five fund choices. Actually there is plenty of behavioural evidence out there that increasing the number of fund choices makes it less likely people will choose. However a product provider wants to put the best gloss on their offering - forget the trustee model, just give us the business and we'll make sure that everything is taken care of.
Trustee ‘paternalism myth’ needs debunking
by Alex Hamilton 03-08-2007
Employees are likely to get better investment choice under a contract-based defined contribution scheme than one run by trustees, Truestone Employee Benefits claims.
And the firm said it was time the myth that trust-based schemes offered greater paternalism was debunked.
It said that trust-based schemes were much less likely to provide scheme members with enough choice or personal involvement in their retirement planning.
It added that schemes should be engaging with employees and providing them with knowledge and tools to make their own decisions – and in the 21st century this goal would be best served by adopting a contract-based approach.
Truestone said this would boost the investment choices available to members and allow individuals to tailor their fund management to their own likely retirement date.
Truestone senior consultant Ed Smithson said: “This myth of a trustee board system providing more paternalism than a contract scheme is just that – a myth.
“A contract-based scheme can offer greater paternal-ism than a trustee board over investment choice. It is time for these 21st-century approaches to be taken on by companies.”
Truestone employee benefits director John Deacon said a typical DC trustee-based scheme would offer only four or five fund choices, which was not enough for all employees.
He said: “Trustee boards could do with exploring in more detail what are the options.
“We are not ‘anti’ the whole structure of trusteeship but if a company has got to a position where it is struggling to find trustees, the realisation is to sit down and say this scheme is not appropriate for us any longer.
“If you cannot get trustees then the interests of the members are not being served.”