On the go: Pensions professionals have said the burden of the increased level of scheme governance is not worth the value it brings, a survey from XPS Pensions Group has found.
The survey, conducted during Build Back Better — a joint event hosted on September 23 by XPS Pensions Group and Ross Trustees, attended by more than 200 pension professionals, found that 57 per cent did not equate more governance with higher value.
Speaking at the event, Kate Hardingham, trustee director at Ross Trustees, said that “good governance improves outcomes”, and so it should be embraced by all schemes, large and small.
“It's true that the new requirements will be harder for smaller schemes to adopt, but small schemes represent a large proportion of the total pension assets invested in the UK,” she said.
But Vicki Hayter, head of trustee and governance services at XPS Pensions Group, noted that although regulation is vital, questions need to be asked around the best ways to achieve good levels of governance.
She argued that issues around “proportionality and cost” for small schemes need to be addressed.
“Trustees will be required to have written policies, processes and procedures in areas including reiteration policies, and policy setting out how these schemes are run. Do schemes really need to document they are organised and run when they’ve probably been run successfully over many years?
“There's a question as to whether the value will outweigh the cost of these policies. Many schemes are run well and achieve good outcomes without having to have dozens of ribbon policies. The increased requirements can become a huge burden on the schemes,” she said.
Rob Wallace, partner and actuary at XPS Pensions Group, said the regulator is right to “raise the bar” of governance. He acknowledged that there will be a “cost implication for many schemes” to get up to speed with new regulatory requirements, but it was “long overdue, and it will lead to improvements in standards of governance”.
Concerns around the burden of increased governance procedures have long been voiced by the industry.
In August, the Pensions Regulator announced it will amend its combined code of practice following an outpouring of industry criticism. The code, intended to combine 10 of the 15 existing codes of practice into one modular document, was intended to make it easier for governing bodies in the pensions industry and professional services providers to identify their legal duties, as well as TPR’s advice on how to meet them.
Meanwhile, in September, public sector schemes voiced concerns about the new code of practice, which necessitated a large amount of new information such as measures around climate change, cyber security, investment, administration and remuneration policies.
The survey also found that pensions professionals overwhelmingly believe that their scheme’s approach to the pandemic was to "weather the storm” rather than ‘make the most of any opportunity, with 85 per cent of respondents identifying the defensive characteristics that many schemes adopted over the past two years.
Hardingham said this approach resulted in the past 18 months being “successful”, with procedures such as remote working and video calls allowing for scheme processes to go “largely uninterrupted”.
Hayter disagreed, and questioned whether the pensions industry “could have gone further” and taken opportunities to “make improvements or gains”.
