The Pensions Regulator has launched a new campaign directed at trustees and their advisers, as part of a wider push to raise governance standards, but experts say its success relies on collaboration and engagement from all stakeholders.
The campaign launch comes following the pensions watchdog's response to its December 2016 discussion paper, 21 Century Trusteeship and Governance, which pledged to focus on improving the quality of trustees through education, while bringing in tougher enforcement for those who fail to meet the required standards.
Focus on the basics
As part of the new campaign, launched on September 18, scheme managers, trustees, advisers and employers will be directed to a new page on the regulator’s website via targeted emails.
The regulator has highlighted how its research, published this month, has shown that poor standards of stewardship and risks prevail, particularly among small and medium-sized schemes.
The new page to which trustees and advisers are directed as part of the campaign presents specific content that sets out clear standards the regulator expects schemes to meet.
The page also runs through the basics of good governance, highlighting the importance of regularly reviewing governance, paying the levy on time and completing the scheme return accurately and on deadline, for example.
In addition, the consequences of breaching these basics are underlined, showcasing the regulator’s “commitment to be clearer, quicker and tougher”, said Anthony Raymond, acting executive director for regulatory policy.
Trustees will also be signposted to practical tools to help raise governance standards in their schemes, and will be pointed towards guidance within the regulator’s codes of practice.
Source: TPR defined contribution trust-based pension schemes research 2017
The regulator plans to add extra content to the website over the next few months, covering a range of themes including integrity, managing conflicts of interest, decision-making and value for members.
“Everyone involved in the governance of pension schemes has something to benefit from this campaign,” said Raymond, adding that the establishment of dedicated pages means the content is suitably tailored for everyone.
Further requirements may put off potential trustees
The regulator has issued extensive governance-related guidance over the years. Darren Redmayne, chief executive of covenant advisory Lincoln Pensions, said some schemes have limited resources in terms of time and money.
“Introducing further requirements for trustees to read, discuss and respond to may not be welcomed,” he noted.
The requirements listed in the campaign are not new, but act as “a further statement from a more interventionist TPR that it wants best practice to be adopted by all schemes”, Redmayne said.
He stressed that, unless this is supported by appropriate enforcement actions, it was possible that it might have little impact.
“TPR needs to be careful. If its requirements of trustees become too onerous, it may discourage non-professionals from taking on trustee responsibilities in the future,” Redmayne added.
He suggested that, in the long term, “the best option for small and medium-sized schemes may be to seek out opportunities for scheme consolidation, including the use of [defined benefit] mastertrusts”.
Trustee behaviour
The launch of the campaign could be another step in the direction of good scheme governance. However, Rachel Croft, director at independent trustee company ITS, said: “In order for the campaign to be effective, all stakeholders need to be engaged and motivated to make any necessary changes.”
Regulator bans trustees
On Tuesday, the Pensions Regulator announced that three people have been banned from acting as trustees of pension schemes over suspicions millions of pounds were swindled from investors using schemes of which they were trustees.
Independent pension professionals had alerted the regulator to reports of suspicious transfers from late 2012 to May 2013 and those involved having conflicts of interest.
Mike Birch, director of case management, said: “Savers have the right to expect trustees to manage their pension schemes effectively. Where trustees cannot or do not do this, we will take action to protect members’ benefits by replacing them and then, where appropriate, ensuring that they can no longer act as trustees.”
Croft noted the move away from quality of scheme governance being measured solely on the existence of certain documents and processes, and instead on governing behaviours.
For example, how trustees make decisions and operate in practice. “In a pensions context, improving behaviours is likely to have a positive impact on delivering good outcomes to members in both a DC and DB context,” she said.
The regulator has also highlighted that focusing on trustee understanding and decision-making is key.
Mark Davies, managing director of River & Mercantile Derivatives, agrees this is a crucial aspect of good governance.
“As trustees’ knowledge of solutions improves, so will their ability to deliver the right outcomes for scheme members,” he said.
“However, while the guidance has been primarily aimed at trustees, it is just as important that consultants and asset managers also take responsibility to ensure it is implemented as effectively as possible,” Davies added.
