UK - The Pensions Regulator (TPR) has signalled it will increased focus on good governance and administration in the run-up to 2012 with the launch of a new campaign targeted at trustees.
It follows the publication of TPR's fourth Occupational Pension Scheme Governance survey for 2009, which revealed while there had been significant improvement in areas such as the establishment of processes for managing conflicts of interest and monitoring service providers and professional advisers, some pension schemes were not displaying the required level of good governance.
For example, it noted that two-thirds of small defined contribution (DC) schemes and half of all small defined benefit (DB) schemes do not provide any trustee training, while only 49% of the 795 trustees interviewed felt "very confident' about the internal controls put in place to avoid inappropriate investment strategies.
Other findings showed there had been a rise in the use of inducements by employers with DB schemes - rising from 5% in 2008 to 8% in 2009. Although TPR admitted the increase is "not statistically significant" it does suggest there "could be an increased propensity" for employers to offer these inducements going forward. Around one in 10 small- and medium-sized companies offered inducements, compared to around one in 20 large companies.
Meanwhile, 84% of respondents offered default funds to their members, of which 63% operated as a lifestyle fund. However, further questioning revealed 17% of the trustees questioned were unable to specify what assets the default fund invested in, and 22% could not confirm what percentage of scheme members were in the default fund.
In addition, the survey showed while the majority of DC schemes review the range of investment choices, fund performance and fund charges at least every three years, "there are still a significant number of schemes that undertake these reviews either infrequently or not at all." Figures showed 21% of respondents said they had never undertaken a review of the investment choices offered and 23% do not assess the level of fund charges.
The new governance campaign is designed to ensure trustees have the right skills and the right people to help them run the pension fund, while also having the right processes in place to manage scheme risks. To help improve current governance levels, TPR intends to publish a revised code and guidance for trustee knowledge and understanding (TKU) requirements as well as update guidance on internal controls and consult on new proposals for record-keeping.
Tony Hobman, chief executive of TPR, said: "Good governance underpins secure pensions. Scheme members entrust their pension savings into the hands of others to a total estimate of more than £1trn (€1.11trn) in assets. This campaign is designed to build on progress made in recent years, recognising that trustees perform a critical role in protecting and managing pensions."
Nigel Peaple, director of policy at the NAPF, agreed good standards of governance and administration are crucial for scheme members, and said while the survey found rising standards in some areas, he admitted "there is still work to be done in helping trustees of small schemes".
He continued: "We are continuing to work with the regulator and others in the pensions industry to raise standards across all aspects of governance and administration. The 2012 reforms present major administrative challenges for trustees and employers. The more we get a risk-related approach from public policymakers, the more trustees will be able to focus on delivering the best possible protection of their members."
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