The UK government has launched a consultation aiming to improve standards of pension scheme trusteeship, governance and administration.
Earlier this year, at the Pensions UK conference in Manchester, pensions minister Torsten Bell called pensions a “vocation”.
Now the Department for Work & Pensions (DWP) says trustees have a “pivotal” role in the pensions system and are responsible for ensuring the financial security and retirement outcomes for millions of pension savers.
With the Pension Schemes Bill expected to transform the UK pensions landscape, the DWP said it is important that, as the system changes, trusteeship, governance and levels of regulatory oversight evolve and change too.
It claimed that with a varied array of defined benefit (DB), defined contribution (DC), DB superfunds and collective defined contribution (CDC) pension funds operating, the issues facing trustees vary significantly depending on the size and type of scheme.
It added that different segments of the market may need different solutions and, therefore, the consultation seeks to explore what the upcoming changes mean for trustees in different areas of the pension system and how trusteeship and governance can evolve to deliver the best outcome for savers.
The consultation seeks to build the evidence base and improve understanding of the issues facing trustees, identify potential risks and future challenges, and establish what systemic or regulatory changes may be needed.
The consultation puts forward proposals in the following areas:
- increasing the knowledge and understanding requirements for trustees, with centrally set standards and accreditation for professionals; and
- measures to improve the diversity of trust boards.
The consultation also asks how the government can ensure appropriate standards for pension scheme administrators are in place and enforced.
Bell said: “The pensions landscape is changing. The transition from DB to DC is well underway. The DC market itself is transitioning to a more mature structure, characterised by bigger schemes. Change is also being accelerated by the Pension Schemes Bill currently before Parliament.
“Amidst this change, one thing remains constant: the importance of good governance, with schemes overseen by trustees that have not only the skills and knowledge to navigate the changes to come, but also members’ best interests consistently front of mind.”
He also noted that the consultation “takes stock” of the UK’s trustee and pension administration landscape, inviting views on the issues trustees are facing during these transitions and where changes might be valuable.
Industry response
The consultation was widely welcomed by the pensions industry.
Tiffany Tsang, head of DB, LGPS and investment at Pensions UK, said: “In the context of a consolidating market, it is right that the government should consider whether and how pensions governance needs to evolve.
“Trustees across all scheme types need the right environment and conditions to do their jobs effectively. Ensuring they have the appropriate skills and capability will be central to success, alongside a proportionate approach that reduces unnecessary burdens and allows trustees to focus on their core fiduciary responsibilities.”
Barry Mack, chair of the administration committee at The Society of Pension Professionals, said that pension schemes must be overseen by trustees who have not only the skills and knowledge to navigate the various changes to come, but also members’ best interests consistently “front of mind”.
He said: “As a result, we welcome this consultation and will certainly be carefully considering our response before submitting our response in the new year.”
Lou Davey, head of policy and external affairs at Independent Governance Group (IGG), noted: “Though no firm proposals are being consulted on, there are many important questions being asked, including how best to consider the member voice, how to support administration standards, and the balance of maintaining an inclusive approach to trusteeship while ensuring high-quality governance.”
Davey added that high-quality trusteeship and governance are “vital” to ensuring good service and good outcomes for pension scheme members.
Rachel Croft, chair of the Association of Professional Pension Trustees (APPT), also agreed that trustees need to continue to have the right skills and experience, and that to be fully prepared to take schemes forward successfully.
However, Croft flagged the need for “careful consideration” in applying any restrictions to appointment numbers or terms, given the need to manage market capacity and encourage the continuation of training and development for professional trustees.”
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