For some time the Pensions Regulator (the “Regulator”) has been undertaking research looking into standards of governance of UK pension schemes and in previous blogs we have commented on the follow up from last year’s consultation on 21st Century Trusteeship.
The Regulator’s view is that many schemes are not meeting appropriate standards of good governance. Earlier this week, in an attempt to tackle this issue, the Regulator launched its new campaign: “21st Century Trusteeship – raising the standards of governance.”
The campaign is particularly aimed at trustees of small and medium sized schemes on the basis that these are the most likely to have failed to act on the Regulator’s existing codes and guidance.
The Regulator has stated that it will provide increased support to trustees by being clearer in terms of its expectations and in the delivery of its messages. Those trustees who fail to respond to the Regulator’s more direct approach will face further regulatory action.
What is good governance?
The first stage of the campaign aims at outlining what the Regulator considers to be good governance and its importance to pension schemes.
The Regulator states that good governance is “the bedrock of a well-run pension scheme”, and that “there is a clear link between good governance and good fund performance”. This illustrates the importance the Regulator attaches to good governance, in essence, because without good governance it is much more unlikely that a good outcome will be achieved for scheme members.
The Regulator has stated that a number of factors help achieve good governance. These include having motivated, knowledgeable and skilled trustees and ensuring proper structures and processes are maintained to enable effective decisions to be made in a timely manner.
The future of the campaign
As the campaign develops it will cover additional core areas such as setting clear roles and responsibilities for trustees, having a clear purpose and strategy for a scheme, managing advisers and providers, and managing conflicts of interest.
The Regulator will be sending targeted communications to trustees, employers and managers directing them to dedicated pages on its website which will contain key information during the course of the campaign.
The Regulator has insisted that it is not creating new or higher standards for trustees. However, it is making it clearer what it expects from trustees and that enforcement action will be taken if good standards of governance are not met.