We all know that good governance lies at the very heart of the effective management of occupational pension schemes.
There are many parties involved in the running of any pension scheme and it is vitally important that each is aware of its role and responsibilities and how they fit into the bigger picture. With this in mind, the Pensions Regulator (tPR) has launched its campaign to boost standards of governance across all occupational schemes.
The campaign is part of its “21st Century Trusteeship – raising the standards of governance” initiative, which followed its consultation with the pension industry in 2016 and was covered by Quantum at the time (see https://quantumadvisory.co.uk/quantum-press/are-you-a-21st-pension-trustee). Following the consultation, tPR raised serious concerns that many small to medium sized schemes were failing to meet even the basic standards of good governance or comply with tPR’s Code of Practice.
tPR is aware that the roles and responsibilities of a trustee have developed significantly over the last few years and the challenges are more varied than ever – the strain brought on by a struggling economy, falling funding positions and the rapid changes in alternatives in the investment market leave many lay trustees feeling swamped by the large number of decisions that they must make and areas they must concern themselves with. tPR is also concerned that a failure of trustees and other organisations to carry out their governance duties may lead to poor member outcomes at retirement.
In its initial stage, the campaign will take the form of tPR sending emails to trustees, scheme managers, employers and advisers to remind them of a number of specific areas of responsibility with regards to governance, including a link to tPR’s website where they can find further information. The particular areas of focus are as follows:
• Clear roles and responsibilities
• Clear purpose and strategy
• Competence and integrity
• Upskilling and training
• Managing advisers and providers
• Managing conflicts of interest
• Managing risk
• Meetings and decision-making
• Value for members
Those who click on the link to the new web page will see examples of what tPR thinks show good governance. Some of these include the basic duties that trustees need to consider, such as: “Do you complete the Scheme Return on time?”, “Do you ensure that a Chair’s Statement is completed?” and “Do you pay your Scheme levy on time?”.
tPR believes that one of the most important ways of guaranteeing good governance is to ensure that the trustees are knowledgeable, engaged, motivated, skilled and that proper processes are in place and maintained to ensure decisions are made effectively. It is also important to note that tPR is not raising the standards of governance, merely reminding all parties involved of their responsibilities for the scheme. They also believe that the role of the chair of trustees is a vital one and that an effective chair will lead and ensure collective competence of the board at all times.
The campaign marks a further step in the direction that is being taken by tPR during 2018 onwards – a clearer, tougher and quicker Regulator. If the trustees, scheme manager and advisers fail to take these basic steps on governance, tPR has confirmed its intention to take enforcement action. This action can include fines, improvement notices, trustees’ suspensions and prohibition of appointments.
So, the message from tPR is clear – governance is key – be aware of your duties and ensure that others are aware of theirs too!
If you have any concerns regarding your scheme, Quantum would be more than happy to help, and ensure that your scheme is governed well, now and into the bright new future.
Martin Strevens, Consultant at Quantum
martin.strevens@quantumadvisory.co.uk