Taking action to tackle gaps in scheme governance

The results reveal that the majority of members are in relatively well-run schemes. Governance and administration across defined contribution schemes have improved, while defined benefit schemes are showing better understanding of our code of practice.

Many small and medium DC schemes are not meeting standards around administration, investments and value for members

However, higher standards of governance, and compliance with the principles of our codes, tend to be a feature of larger, better-managed schemes.

In response to the survey findings, we have published a paper that sets out how we will tackle poor standards of stewardship and risks around subscale schemes by making our expectations of trustees clearer and enforcing against non-compliance.

For individual small and medium schemes the surveys are disappointing and highlight major gaps in the standards we expected, including that:

• they tend to display poorer governance standards, for instance, they place less focus on training arrangements, regular board assessments, effective internal controls and oversight of third parties;

• many small and medium DC schemes, (including those used for automatic enrolment) are not meeting standards around administration (eg, ensuring prompt and accurate transactions), investments (setting appropriate investment strategy for the default fund) and value for members (assessing quality of services provided to members);

• significant issues also remain among DB schemes, in particular around integrated risk management and fair treatment of the scheme.

Overall, the surveys illustrate that while some trustees are doing a good job, many trustee boards are not complying or acting on our codes and guidance to meet basic standards of good governance.

Our 21st century trusteeship campaign will support trustee boards to reach and maintain standards, focusing on the fundamentals of good governance, and helping them understand the consequences of failing to meet the standards.

The campaign will launch shortly and we will be communicating extensively with trustees in the months ahead to set a clear benchmark for anyone working as a trustee.

As part of our commitment to be a clearer, quicker and tougher regulator, we will be stepping up our regulatory action in cases where trustee boards fail to meet minimum legal standards, and we will look to publish the details of that action.

We will also continue to examine whether substandard schemes should be consolidated with larger, well-run schemes.

Anthony Raymond is acting executive director for regulatory policy at the Pensions Regulator