Chair’s statement template to ease trustee headaches

Chairs of DC schemes are required by law to compile a statement to members explaining investment strategy, administration, costs, value for money and other aspects of governance, produced as part of their annual report.

But the application of the rules has attracted criticism from some trustees, who feel they have been caught out and fined by the Pensions Regulator over technicalities, rather than failings in their governance.

Releasing the template, which was created in consultation with advisers and lawyers, the PLSA said that the template should ease trustee difficulties without letting them off the hook on aspects that are important to members.

Laura Myers, chair of the PLSA’s DC committee, said: “This has long been a concern for trustees and that’s why I am delighted to have contributed to this template statement.

It will hopefully provide a useful starting point and guide for trustees to help simplify the production time and cost on documenting their governance, so they can instead focus these costs on the areas that will make tangible improvements to members’ outcomes.”

The template is appropriate for standard occupational DC schemes, being based on the requirements of regulation 23 of The Occupational Pension Schemes (Scheme Administration) Regulations 1996. The template’s creators cautioned that it should be used in conjunction with the regulator’s guidance, while the watchdog itself cautioned trustees not to avoid asking tough questions of themselves.

David Fairs, TPR’s executive director of regulatory policy, analysis and advice, said:“A chair’s statement is a basic requirement of good pensions governance and should be written clearly enough for members to understand, and so I welcome any assistance provided to the trustees such as the PLSA’s drafting template. 

“The template doesn’t remove the need for trustees to carry out the fundamental analysis forming the foundation for a chair’s statement or consider how the statement requirements apply in the case of their scheme, but it should help in collating the information needed and help to present this clearly to savers.”

Anna Copestake, a partner at Arc Pensions Law and member of the PLSA DC governance team, said: “DC chair’s statements eat up a depressing amount of trustee time and budget. Hopefully the template will make the process less costly all round. It provides a useful checklist for gathering the information to be reported, as well as a framework for presenting it.

“It would be wonderful if it enabled trustees to redirect resources to furthering member outcomes.”

However, she added that the statements will still need to be tailored to each scheme, and that further improvements to the practical application of the requirement could still be made.

“It’s not a magic bullet to some of the pain caused by the chair’s statement regime. The mandatory penalty for any form of non-compliance remains an obstacle to delivering value for members through this governance initiative.”