OECD calls for better pensions governance
GLOBAL - The Organisation of Economic Cooperation and Development has just published guidelines and regulatory principles from which it believes all pensions regimes should base their pension fund governance, to deliver "stronger regulation and better governance".
The 13-page guidance document approved by the OECD Pensions Working Party stipulates the key elements of governance practices and procedures that a pension fund ought to have.
None of the proposals are especially controversial as they broadly follow the defined benefit pension fund governance regimes adopted in countries such as the Netherlands and the UK.
Within any pensions structure, there must be "clear identification and separation of operational and oversight responsibilities in the governance" said the OECD, which stated core criteria required are:
The body argued "as good pension fund governance should be risk-based, the division of responsibilities should reflect the nature and extent of the risks posed by the fund", so where there is a sophisticated investment strategy suggested the Working Party, an investment sub-committee might be appropriate.
Similarly, the pension fund should regularly review its operations, staff and practices to ensure internal controls and systems operate efficiently and within the fund's own risk controls.
At the same time as publishing its recommendations on pension fund governance, the OECD has also set out in detail the principles under which it believes governments should manage pensions regimes.
A second 25-page document on principles recommendations has also been published today as "a blueprint for policymakers to improve the regulation and supervision of private pension systems".
Officials said while attention to date has been focused on improving banking regulation, now is also the time to strengthen regulation of private pension funds".
It has also unveiled a methodology from which it will assess whether the regulatory principles are being appropriately implemented.
This methodology is expected to be used in the scrutiny of five frameworks under analysis, according to the OECD: Chile, Estonia, Israel, the Russian Federation and Slovenia.
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