Small pension schemes have less
developed arrangements to spot and manage risks to members'
savings, according to new research by The Pensions Regulator
(TPR).
The latest report from the regulator
found only 27% of small defined contribution (DC) pension schemes
have formal governance arrangements in place compared with 94% of
large DC schemes and 89% of master
trusts.
It is the first time TPR has used a
survey to measure trustee governance practices across the market.
The new data establishes a baseline as reforms reshape the
pensions market and raise the demands of trustee
boards.
TPR is calling on trustees to act now
to make sure they have the governance, skills and capability
needed to make increasingly complex decisions in the interests of
members including making active decisions about the future
strategic direction of their scheme. This includes consolidation
in the interests of members.
The research, conducted independently,
with hundreds of trustees across both defined benefit and defined
contribution schemes
found:
-
Trustee boards face conflicting
decisions on focus with only 29% of trustee boards
sayingimproving member outcomes was the primary driver of
trustee decision-making. While 55% said member outcomes
influenced decisions, but they balanced it with other
priorities such as regulatory compliance and cost which were
equally important.
-
And fewer than half of DB and DC
schemes, excluding micro schemes, reported having a trustee
succession plan, highlighting a gap in planning for future
trustee appointments.
TPR says the findings present new
expectations for trustees to benchmark their governance against
itsGeneral Code, strengthen succession planning and board
development, and ensure governance and risk management
arrangements are supporting good outcomes for members.
TPR's Executive Director of
Strategy, Policy and Analysis, Richard Knox,
said:
"The decisions facing trustees are
becoming more complex and consequential. That is why the bar on
governance standards is rising. Every trustee board should be
asking themselves whether they
have the skills and experience needed to make good decisions now
and in the future.
"We expect all trustees to review
their governance against the General Code and keep member
outcomes at the centre of their decisions."
TPR will use the survey as a baseline
to track how governance develops as the market and regulatory
framework change. As part of this, the regulator will be
focussing its work on supporting trustees and boards in assessing
their skills and competencies as well as developing its
understanding of how schemes are using Effective Systems of
Governance (ESOG) and Own Risk Assessments (ORA) to drive
improvements in their governance.
- ENDS -
Notes to
Editors
-
The survey sample included micro
schemes (fewer than 12 members), small schemes (12-99
members), medium schemes (100-999 members), large schemes
(1,000 or more members) and master trusts. The survey data
has been weighted by scheme size and type to ensure the
findings are representative of the wider in-scope scheme
population.
-
The survey gathered interview
responses from 373 trustees across schemes of different
typesand sizes, to establish a baseline measure of governance
across the market that can be compared across scheme types
and sizes and tracked over time. The majority of interviews
were conducted by telephone, with interviews for master
trusts carried out by senior OMB Research
executives.
-
Findings outlined in this press
release, unless otherwise stated, do not apply to micro
schemes, which are for 12 members or
less.
