On the go: Pension schemes should appoint an independent professional trustee that can help navigate the increasing complexity and risk involved in day-to-day operations, Willis Towers Watson has advised.
This is one of the recommendations made by the consultancy in its good governance guide for pension schemes, published on Tuesday.
The guide suggested that the experience and specialist knowledge held by independent trustees can provide fresh insight and leadership for schemes.
Research published in June by WTW showed that nearly nine in 10 schemes that have at least one independent professional trustee asserted that all schemes should employ one.
The guide provides an analysis of the Pensions Regulator’s new combined code, while outlining steps that schemes should take to ensure they are ready and compliant for its implementation at the end of the year.
In March, TPR proposed a new code of practice that was said to have “major implications” for pension schemes, introducing a raft of new duties and requirements around climate change, stewardship, investment and administration.
The new code’s ostensible purpose is to combine 10 of the 15 existing codes of practice into one web-based document.
WTW suggested five areas that schemes should pay attention to, starting with a reminder that better governance produces better outcomes, which includes an overview of TPR’s new code and what this will look like for schemes.
The second area looks at the right people in the right roles, aiming to understand how schemes can meet the requirements of the combined code set out by the regulator, including when allocating the code’s new rules.
The third segment explores key actions that trustees will need to take to prepare for the introduction of the new code, while the fourth area details practical suggestions on how to improve scheme outcomes further through governance strategy.
Finally, the guide looks at decision-making through a lens of inclusion and diversity, which WTW stated is essential to both the success of the plan sponsor and its pension scheme.
Jenny Gibbons, governance lead at WTW, said: “Governance is the glue that holds pension schemes together and is tied intrinsically to effective decision-making. It is the collection of structures, practices and behaviours that facilitate good decisions.
“It is therefore not surprising that TPR has focused in recent years on improving the governance of schemes.”
However, Gibbons noted: “The complexity and time required to run a scheme has increased significantly in recent years, but professional trustees have the specialist knowledge and resources available to manage these challenges.”
Nick Gannon, policy lead at TPR, said: “We welcome any initiative from the industry that helps trustees understand the expectations we have set and the effort needed to achieve these goals, which will have a big impact on schemes’ success in the long run.
“TPR is pleased by the responses we have received to our consultation, which shows the industry is working to understand the new code before it comes into force.
“We will be responding to the consultation feedback in due course. In the meantime, governing bodies can still take steps to understand how any new requirements may apply to their scheme.”
