UK – Three UK pension funds – Royal Mail, Telent and SAUL – have started a project that aims to measure the relationship between the governance structures used by UK pensions schemes and the investment required to maintain them.   

The Pensions Governance Index project is designed to help pensions schemes better understand how to meet their governance ambitions as effectively and efficiently as possible, they said, as trustees recognise that the way they make decisions has a direct impact on the outcomes they can achieve in their investment, administration and other activities.

Its purpose is to develop a set of pensions governance resource measures that do not currently exist.  

Magnus Spence, director at Spence Johnson, the project manager of the Pensions Governance Index, told IPE: "The project aims to measure the relationship between the governance structures and the required investment by capturing data about what money is being spent on by pension funds and how that is being directed to achieving certain governance structures.

"If we identify that a pension scheme has a particular governance structure we can then show what that governance structure has cost.

"This was originally planned by the pension schemes themselves, which have also structured the way the questions are asked – in other words, we merely act as the servants of the pension schemes in this project."

The Russell Investments-sponsored project was initiated by the pension funds because they needed better governance resource information for their own decision-making purposes, and assumed others would too, he said.

They also hope the initiative will be a catalyst for a more informed industry-wide debate around governance issues.

Sorca Kelly-Scholte, managing director of client strategies and research at Russell, told IPE: "The project is about internal governance and the management of pension funds. It looks at how trustees set themselves up to make decisions around the funding and benefits administration of their pension plans and how they go about making their investment choices from strategy through to manager selection and ongoing monitoring.

"Starting to gather the information is the first step. In the long term, we hope to be able to correlate good governance practice with improved funding levels – in other words, identify what can help drive the improvement in scheme funding levels."

The set of pensions governance resource measures is expected to be published in June.

The project targets at least 30 significant pension schemes to supply information.

Funds that participate in this initiative will receive a special tailored benchmarking report at no cost showing how their governance resources compare with other funds with a similar governance approach and size.

Responses will be collected by Spence Johnson, which will ensure participant data is kept confidential.

Pension schemes that are interested in participating are invited to go to the Russell Pensions Governance website.

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