As I considered the content for this month in pensions piece, my working title edged naturally to “Much Ado About Nothing”. As we enter the final six week run in to GDPR and I consider the prevalence of GDPR in seminars I have attended over the past 18 months, the amount of correspondence I’m still receiving every day, the lack of any concrete action from most parties until very recently, and the crazy costs being charged by some firms, I’m still scratching my head a little as to what’s the big deal.
The regulations didn’t have pension schemes in mind and by their nature pension schemes become a special case. We need the data to pay your pension; I have so many obligations to make sure that data is adequate, up-to-date and accurate and if I already comply with the Data Protection Act I’m pretty much OK. There are a few extra governance steps to confirm, record and communicate compliance, but on the whole not a big deal to a properly run pension scheme.
So with little to write about on GDPR, the timing of the White Paper seems like a windfall, but on the whole its more about nothing for most trustees.
The White Paper is primarily about empowerment of the Regulator, but also of trustees.
In most cases the proposals are for extensions of powers that already exist, codifying best practice and clarification. The major items such as new criminal offences and higher fines will affect a minority of pension schemes with unscrupulous sponsors and inadequate stewardship.
For the majority of trustees many of the proposals should be welcomed, as they help clarify some grey areas and almost feel like an extension to the Regulator’s 21st Century Trustee programme.
Updating the funding Code of Practice to more clearly define what is intended by prudent technical provisions and appropriately set recovery plans, should improve understanding and the efficiency of funding discussions. It should not lead to an overly prescriptive regime as the continued need for scheme-specific funding solutions is clearly included.
It is unusual for a well run pension scheme not to have a secondary investment objective; whilst many triennial funding agreements are still broadly affordability based, most schemes have an eye on the end game with some level of buy out or self sufficiency flight plan envisioned. Formalising this should be welcomed to enable proper monitoring, and with modern tools it could be identified as obtainable much sooner, and less expensively than expected provided you can move at the right time. Whilst all trustee meetings need to be chaired, I’m not sure all trustee boards need a permanent chair or that the chair should have any greater responsibility than the other trustees.
However, trustees should already be writing up the process followed to agree their Statement of Funding Principles and Recovery Plan, and therefore a statement of the trustees to confirm this should not be an additional burden.
So, despite lots of excitement, debate and bureaucracy, there’s no real change for the well managed, well governed pension scheme.