Regulatory reminder of basic trustee duties

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A reminder of the importance for trustees and employers of complying with basic governance duties has been provided by a number of recent regulatory bulletins.

In particular, the Pensions Regulator has drawn trustees’ attention to their duty to submit an annual scheme return and (in relation to DC schemes) to produce an annual chair’s statement.

Whilst we would expect most effective trustee boards to be well aware of these duties and to have appropriate mechanisms in place to ensure that they are met, the renewed focus on basic scheme governance does draw attention to a trustee’s fundamental duty to maintain sufficient knowledge and understanding for their role in view of the broad and complex range of issues which face the modern trustee board.

Scheme returns

All trustees and administrators should be familiar with the requirement to submit an annual scheme return to the Regulator. From a trustee perspective, one point which is crucial to note is that the obligation (and the penalty for failing to comply) is on the trustees, even if the submission of the return is delegated to administrators. Trustee boards should therefore ensure that they have appropriate internal controls for ensuring that their administrators are carrying out these tasks.

So far 88 fines have been issued to trustees for failing to submit a scheme return and the Regulator has explained in its recent publications that it will be adopting a zero tolerance approach on this issue in future.

Chair’s statement

Trustees of DC schemes must nominate a chair and, each year, that chair must produce a statement which covers various matters required by law.

A key point for trustees to bear in mind when producing a chair’s statement is that input is likely to be required from a number of different advisers. Preparation should begin as soon as possible after the end of the scheme year so that the statement is fully completed and can be signed off within the seven month deadline.

Despite the Regulator proactively contacting trustee boards since this requirement was introduced in 2015 to remind them of their responsibilities, 85 fines have been issued to trustees who have failed to comply with this duty.

Regulatory focus

The focus on these basic governance duties is part of a wider shift in regulatory strategy which was noted in the Regulator’s recent annual report. By paying particular attention to schemes which fail to comply with the most basic requirements, the Regulator hopes to be able to identify those schemes which have broader and more systemic governance failings.

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