UK - The Investment Governance Group (IGG) has published a set of guidelines outlining the best governance procedures for future defined contribution (DC) schemes.

The Investment Management Association (IMA) welcomed the news, saying good governance was "essential" at a time when more risk was being transferred to employees in the wake of the auto-enrolment review.

The IGG, which drafted the guidelines with the Confederation of British Industry (CBI), said any scheme must have a transparent structure, allowing for each party involved to be clear about ongoing processes.

It also said an informed decision must be at the heart of any investment choice and that employers should therefore consider offering access to advisors to allow this, as well as guaranteeing all investment options are tailored to fit scheme members and their diverse needs.

Richard Saunders, chief executive at the IMA, said that while the shift toward DC schemes brought many benefits for employees, it also transferred investment risk to them.

"Good governance arrangements are therefore essential, particularly in areas such as default fund design," he said.

"The Investment Governance Group's work marks a significant step forward in helping those running DC pension schemes develop their governance frameworks."

In other news, new regulations in the US could result in UK pension funds losing 30% of dividend payments from US companies if they fail to comply with new tax guidelines, according to law firm Hogan Lovells.

Under the Foreign Account Tax Compliance Act (FACTA), which was introduced as a result of the Hiring Incentives to Restore Employment Act this year, US authorities are looking to target overseas tax evasion and asking pension schemes that have members from one of its states enrolled to comply with new reporting requirements.

Under the current interpretation of Foreign Financial Institutions (FFI) put forward by the Internal Revenue Service, many European pension funds would be excluded, but these exemptions would not cover UK schemes.

Penny Pilzer, a council in the London office of Hogan Lovells, said: "UK pension plans will be discouraged from investing in the US if tax is withheld at a rate of 30%. 

"We hope the IRS and US Treasury will fashion an exemption from FATCA requirements that is broad enough to allow UK plans to continue to invest in the US without red tape and without a withholding tax."

The proposed changes would take effect from January 2013.

While formal consultation closed yesterday, it is believed the European Fund and Asset Management Association received an extension and will make a submission in two weeks' time.

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