TPR says many trustee boards have failed to act on its codes and guidance on governance. Anthony Raymond explains what the watchdog is doing to address the problem.
The Pensions Regulator's 21st century trusteeship campaign to drive up the standards of governance across pension schemes has now been running for several months.
So far we've covered: good governance - having the right people, structures and processes; the importance of having clear roles and responsibilities; and having a clear purpose for the scheme, including putting a clear business plan and strategy in place.
This week we launched our most recent topic on learning and development. It looks at the legal requirements for trustees to have the knowledge and understanding they need to perform their role, why it's important for trustees to improve their skills and includes tips on how to get training.
This campaign is part of our commitment to support schemes by being clearer and raising awareness about the standards we expect. And support is an essential word here.
There has been some concerns raised that this is placing an extra burden on trustees and scheme managers. However, through this campaign we're not asking lay trustees to meet new or additional standards. What we are doing is supporting trustees by being clearer about the existing standards that need to be met and pointing them to resources and tools that can help.
Why are we doing this? Our research has shown that while some lay trustees are doing a good job, many boards, particularly in small and medium schemes, have failed to act on TPR's codes and guidance to meet the standards of good governance. It's disappointing.
Essentially, if trustees don't run a pension scheme well and fail to meet the standards that are required, then we may consider taking enforcement action. We believe that not complying with basic requirements, like failing to complete a chair's statement and a scheme return, may be a sign of broader governance issues.
Trustees are responsible for managing the benefits of workplace savers so it's important that they spend time and resources on governance. Good governance is the bedrock of a well-run pension scheme and there is a clear link between good governance and good scheme performance.
Our 21st century trusteeship campaign focuses on a number of themes to address the problems we see in schemes and will continue to highlight what we expect trustees to do on a practical level. As the campaign continues we'll cover topics including managing advisers and service providers, managing risk and how to deal with conflicts of interest.
Separately we are also supporting the Professional Trustee Standards Working Group to set new minimum requirements and start an accreditation process, which will also help drive up standards.
We recognise that running a pension scheme can be complex and challenging, but achieving a high standard of governance will help overcome these challenges and, most importantly, deliver good outcomes for pension savers.
Anthony Raymond is acting executive director for regulatory policy at The Pensions Regulator
January - learning and development
TPR says training is important to make sure that trustee boards have the skills, knowledge and understanding to run a scheme properly. It says there are legal requirements to have knowledge in certain areas and notes that trustees should carry out regular assessments to identify strengths and weaknesses, and address any gaps through a training plan. TPR has developed a downloadable ‘plan your leaning' tool to support trustees. It has also collated tips to help trustees get the knowledge they need, including by using its trustee toolkit.
February - competence and integrity
As well as making sure trustees have the right skills and knowledge, the regulator believes a board should also behave competently and act with integrity. It says trustees should be willing and able to run a scheme well, and act in the best interests of the scheme. TPR says, to ensure this, trustees should evaluate their effectiveness as a board.
March - working with advisers
The regulator says trustees should appoint advisers and service providers who can provide good quality advice. When appointing people, it says this means being clear about the selection criteria, researching the reputation of different providers and asking for recommendations to make sure the best people are employed. TPR says trustees should understand the advice they receive and critically assess and challenge any recommendations, as they are ultimately responsible for decisions made about a scheme.
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