Regulator fleshes out compliance approach to public sector

Since becoming responsible for the schemes, the regulator has ramped up the focus on record-keeping and governance.

However, experts have said spending pressures on the public sector could create a compliance challenge for some schemes.

In a statement this week, the regulator outlined:

• how it would identify and assess risk in public service schemes;

• its approach to monitoring; and

• how it will investigate and enforce compliance.

This is just setting out a principles-based approach to good scheme governance

Ralph McClelland, Sackers

The details were released following a consultation in February and March.

Enforcement

The regulator emphasised it would focus on helping schemes to comply.

It said: “Most of our activities will be focused on educating and enabling schemes to improve standards of governance and administration – particularly in the early stages of the new regulatory regime as schemes reform and adapt to meet the new legal requirements.”

However, it added: “Where scheme managers or pension board members fail to address poor standards resulting in non-compliance with the law, we may consider escalating our activities and taking enforcement action.”

Karen McWilliam, head of public sector benefits at consultancy Aon Hewitt, said she expected compliance would not be a persistent issue for public sector schemes.

“If there are any issues going forward I think they’d be very temporary,” she said. “I’m not sure I expect to see any [non-compliance].”

Ralph McClelland, associate director at law firm Sackers, said the policy “probably won’t cause a big splash”. He said: “It’s not the same as trying to move the entire [Local Government Pension Scheme] to [career average]” .

“This is just setting out a principles-based approach to good scheme governance.”

But McClelland added the squeeze on public sector budgets was increasing pressure on local authority schemes at the same time as efforts were being made to encourage good governance.

“If a priority is for these schemes to be well run, you have to accept that that costs,” he said. He added that the requirement for public sector transparency on costs could make it more difficult for employers to dedicate additional resources to the pension scheme.

“Because the public sector has to be more transparent than, for an example, a large bank… the bank is probably better placed to throw resource at [the pension scheme],” he said.