How can employers, providers and trustees work together to ensure good governance?

Andy Cheseldine: In defined contribution, it is relatively straightforward; there should not be too many conflicts of interest. Once an employer has decided how much they are going to make the contributions, it is just about making sure that you run the scheme properly.

It is important that you have the right people sitting around the table to discuss what is good for the employees

Rosemary Lemon, Hays

I would like to think that trustees, in most cases, will work very closely with the employers. I do not think there is too much of a conflict in DC.

Rosemary Lemon: It is important that you have the right people sitting around the table to discuss what is good for the employees and what is good for the plan going forward, so a real mix of the provider, somebody who understands the financial investment, and somebody who understands the employees and what they need.

A lot of DC steering committees, or governance committees, perhaps meet quarterly. I think it is too infrequent to just carry on meeting on a quarterly basis; you have to have those relationships outside of those governance meetings as well.

Caroline Roberts: I would strongly agree with that because, as an HR professional, there are so many elements of reward, of the employee lifecycle, where pensions do have an effect. I am actually hugely reliant on people who are either trustees or involved in the pension in some way, whether it is changing policy or looking at total reward packages.

It is something I now find myself talking about on a weekly basis where it used to be every three months or so.

The way that people with a pensions background, as opposed to HR people such as myself, approach it means you get a really interesting insight. It is a completely different way of looking at things.

Employers have the choice in terms of how much they want to deliver governance themselves or in partnership and how much they want to more formally outsource

Mark Rowlands, Nest

Ami Bartrip: When we started our new DC scheme under our new owners, one of the biggest bits of conversation we had with representatives and unions at the time was around what governance and protection we were going to put forward. It was important for us that we had the right people there.

Obviously, the provider sits on that board. We also have board members from the FT, and employee reps as well. What has been really useful is those employee reps have supported us in engaging with our employees. One of the members of the governance committee actually joined us in the beauty parade when we were meeting lots of providers; it was really good to have an employee that was asking some of the questions to support us making that choice.

Jason Green: We deal with a lot of employers on a weekly basis. Auto-enrolment undoubtedly has brought pensions to the forefront for a lot of employees. I think it is now 9.2m we are up to who are auto-enrolled.

Whenever we speak to people, people do not know who their pension is coming from, who their trustees are, what their trustees do. One of the great things about auto-enrolment is that it has brought this very much to the forefront now. People are becoming more aware, which then drives the need for education, the want for education.

Mark Rowlands: There is a strong argument that says governance is the most important aspect in delivering good member outcomes.

If we start with that premise, as Rosemary and a few other people have mentioned, it is about the skillset around the table. It is also about the time allocation of governance – because to do governance well is a very time-consuming requirement.

I think employers have the choice in terms of how much they want to deliver governance themselves or in partnership, and how much they want to more formally outsource. Depending on that decision-making process, as the employer, they either end up in an own trust, a group personal pension or a mastertrust.

That will then drive, potentially, how much effort they put into it themselves and how much they are relying on a set of third parties with the right professional skill mix. However much you do that, the employer will always have a role but the amount of effort required will vary immensely depending on which one of those three routes they have gone down.

We should not underestimate how hard it is to do governance well, but it is so essential that we get it right as an industry because that will absolutely drive the right outcomes.

Nasir Rafiq: At Islamic Relief we have a DC scheme; it is a relatively new scheme. Because of being a charity we have some unique pressures, and being faith-based we have some additional unique pressures. For example, our products have to be Sharia-compliant in what they invest in.

We had a governance review back in December. From that review the one thing that came out for me was that in order for this to really work for the organisation, the pension needs to be hardwired into HR discussions, as well as finance discussions. So, having the right person at the table, or the right contribution of functions on the governance committee, is very important. The discussions around pensions need to be part of your budget discussions; they need to be part of your HR strategy.

To do governance well, governance is not just about minimising the risk but also ensuring that we maximise the benefit from this as well.

Cheseldine: I think Nasir and Mark make a very good point. It probably depends what you mean by an employer. There are at least three categories: typically bigger employers who are very committed to their own particular scheme, employers who simply buy a product, and then employers where it is more than just a pension – where it is more fundamental to the whole ethos of the organisation.

Governance means different things to different employers. Sometimes they will just pass it on to a provider and they will do it all.