The chair’s statement is not just a tick-box exercise

Our research shows there is some very good practice out there – but it also shows that standards are patchy. Our message to trustees who are not up to standard is simple: it’s time to step up.

Remember the importance of the chair’s statement is not the statement itself, but the good governance it shows in the processes it reports

Our defined benefit and defined contribution surveys show that the majority of members are in relatively well-run schemes but that higher standards of governance, and compliance with the principles of our codes, tend to be a feature of larger, better-managed schemes.

We want trustees to be an empowered first line of defence for savers across DB, DC and public service schemes, to ensure they receive the benefits they deserve.

One of the ways we can check to see whether trustees of DC schemes are governing well is to look at their chair’s statements. These should not be a tick-box exercise, which is why we do not provide a template. We expect trustees to think about their own practices and explain to us and their members how they are providing good governance in a series of areas.

This week we updated our list of schemes that have been fined for failing to adhere to the basics, including sending us their scheme returns and submitting a chair’s statement.

Meanwhile, our latest compliance and enforcement bulletin shows we have issued a further 18 fines for failing to submit a chair’s statement, taking the total to 130 to the end of September this year.

While we have no discretion over whether or not to issue a fine in these circumstances, we understand it can be difficult knowing the level of detail to pitch in a chair’s statement. So we have published new practical guidance, which sets out the legal requirements of the chair’s statement and our expectations on how they should be met.

The guidance addresses some of the common problems we have seen in the statements submitted to us. It also gives examples of what we would consider to be a ‘good’ or ‘poor’ chair’s statement. There is a checklist at the end for trustees to use so they can be confident that they have addressed all areas sufficiently.

I urge DC trustees to read the guidance. A poor statement is much more likely to be non-compliant and therefore result in the trustees or managers of the scheme being personally liable to pay a fine of between £500 and £2,000.

But remember the importance of the chair’s statement is not the statement itself, but the good governance it shows in the processes it reports. Good governance is the bedrock of a well-run pension scheme, and there is a clear link between good governance and good fund performance. It is not a tick-box exercise, but an essential part of effective scheme management – for all schemes.

Fiona Frobisher is head of policy at the Pensions Regulator