NAPF Annual Conference 2014: Senior industry figures have called for independent governance committees to be more like trustee boards in their activities, to protect member interests.
A panel on governance at the conference yesterday saw one speaker endorse the view expressed by shadow pensions minister Gregg McClymont, who questioned how independent the committees were likely to be, given the duty of providers to maximise value for their shareholders.
From April of next year it is mandatory for contract-based schemes to have an IGC in place, following a review of defined contribution schemes by the Office of Fair Trading.
Debbie Harrison, senior visiting professor at Cass Business School, said: “I’d like IGCs to prioritise members rather than bear their [own] interest in mind. It should be a priority as it is with trustees.”
I’d like IGCs to prioritise members rather than bear their [own] interest in mind. It should be a priority as it is with trustees
Debbie Harrison, Cass Business School
Harrison highlighted the way in which trustee boards address conflicts of interest as important to good governance: “The governance board should be able to do that. Conflicts of interest are good. You get them out on the table. You debate them with various stakeholders and you can make a decision. I’m more concerned about vested interests.”
Another major focus for IGCs should be transparency around costs, Harrison said.
“Irrespective of what happens with disclosure, I’d like to see a requirement for providers to give full disclosure of all their costs,” she said.
But Laurie Edmans, trustee of the Trinity Mirror pension scheme, argued there was too much focus on charges, highlighting a presentation by mastertrust Nest – for which he previously served as a trustee – that identified the primary factors in determining a saver’s pension pot in retirement.
He said: “Over a 45-year life… The bulk of retirement [income] is made up of the contributions. The investment return is important, but the charges are a poor third.”
Indemnity issues
Harrison raised concerns about protections in place for committee members, which are not at the same level as those for trustees.
“I don’t think there’s a requirement for indemnity, which concerns me,” she said. “I wouldn’t want to be on a board that didn’t have some form of protection.”
She also raised concerns about the ongoing strength of the provider.
"One of the issues that concerns me is the provider covenant,” she said. “There are a lot of providers in the market and not all of them will survive… What is going to happen if these providers withdraw from the market?”
