The UK pensions regulator should change its approach to ensuring good pension fund governance from one focussed on processes to people, according to the country’s pensions trade body.
Releasing a discussion paper on what constitutes good pension fund governance, the Pensions & Lifetime Savings Association (PLSA) said it depended on the people who provide it.
The Pensions Regulator (TPR) should therefore concentrate on ensuring that individuals who are appointed to boards and committees have the appropriate knowledge and experience, according to the PLSA.
It said this is not TPR’s current approach, and that its discussion paper suggests this is focused on process rather than people. This had not worked so far, according to the PLSA.
“Regulation attempts to manage schemes from the centre by mandating the individual processes that schemes undertake but has not delivered the necessary improvements,” it said.
Joe Dabrowski, head of governance and investment at the PLSA, said: “Regulatory oversight should […] focus on ensuring the right people are appointed to governance positions and let them take decisions in the best interests of their scheme.
“We believe this would deliver the high standards of governance necessary to give pension scheme members security and confidence in their pension fund.”
The PLSA suggested that the regulatory approach to pension fund governance in the UK could take inspiration from the country’s corporate governance regime, which was a principles-based, input-focussed approach.
“Corporate governance in the UK is well-regarded internationally and the high profile scandals that pre-dated the Corporate Governance Code have become much less common,” said the trade body. “Pension funds could similarly gain from a move in regulatory focus towards governance inputs.”
It added that while the UK’s corporate governance regime was subject to intense media and political interest, pension fund governance was subject to comparatively little scrutiny.
Commenting on the PLSA’s pronouncements, a spokesperson for TPR said it wanted those running pension schemes to be “a knowledgeable, empowered first line of defence for scheme members”.
“We will be focusing on making our expectations clearer, taking action against poor governance and encouraging consolidation where appropriate,” it said.
It will not be imposing new or higher standards of governance, however. It will soon be launching a campaign focussed on the fundamentals of good governance, according to the spokesperson.
In the longer term, it intends to streamline and consolidate its existing stock of guidance and improving its website in a bid to provide further clarity about its expectations.
Last month TPR published a revised description of who it considers to be a professional trustee, saying this paved the way to build standards and accreditation for professional trustees through the Professional Trustee Standards Working Group.